So, you want to get your new business off the ground and running. This is an incredible accomplishment, but it can’t be completed without having outstanding credit. If you have no business credit, financing for your business will be a bust. Without secure backing, you’ll surely be in debt before even getting started. Here is a brief rundown on how to build business credit so that you can set your latest venture up for long-term success!
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Four Key Points
When building business credit, there are four key points you need to keep in mind:
- Make a name for yourself
- Come up on credit reports
- Be on time with payments
- Responsibility is key
Let’s explore each of these, below!
Make Yourself Known
Create general awareness of your new business by doing the following:
- Building a website
- Getting a phone number
- Acquiring a physical address
- Opening a business credit file
These steps make it clear to potential patrons and lenders that you’re opening an “official” business. Without any indication that you’re a “real” business, it will only make it more difficult to get the credit you need to take the next steps.
The above items are relatively clear-cut and should not take a ton of effort. You could probably get an intern to get these things moving for you, or simply spend some time yourself to get established. Don’t delay, as any confusion or lack of clarity will be a roadblock.
Ensure Your Business Comes Up On Verifiable Credit Reports
Check the credit report sites (such as Equifax or Experian) to make sure your business is listed. It may not be if you have been using your personal finances and credit cards to get the business afloat. You need this verification for credit scoring and to build a decent credit report.
If you find that your company is not listed, you need to do the following:
- Incorporate your business (LLC)
- Get a D-U-N-S number
- Get a federal employer ID number (EIN)
Although not required, you would also benefit from opening a business credit card (or a couple) separate from your personal credit, as well as a separate business bank account from your personal account(s).
Pay Your Lenders, Suppliers, And Vendors On Time
Do not fall behind on payments, as this will bring down your credit rating. Plus, it will also cause friction with those you will want to have on your good side as your business grows. If you’re having trouble making ends meet, work out a fair compromise or long-term, doable payment plan. You certainly don’t need bad reviews or a rotten reputation when you are starting out, nor the headache of mounting bills that you can’t manage.
Be Responsible
As eager as you are to make your business a roaring success, don’t forget to look at the big picture when making day-to-day financial decisions. Acting on a whim, borrowing a load of money you will not be able to pay back for a stretch, or going all-out when you ought to be more conservative (at least at first) can lead to a mountain of crushing credit problems you may not be able to recover from.
Falling deep in debt could flat-out destroy your business, potentially leaving you bankrupt. Recovering from this could take years, and you may never be able to bounce back entirely. Consider refinancing or debt consolidation if you need to reassess how you pay for your business needs until you get over the hump. Meet with a trustworthy financial advisor for best practices and a spending plan you can follow reliably.
Building Credit is Key
With good business credit, you may be able to lower your business insurance premiums and get more desirable credit terms from banks as well as other lenders. This is a huge saving that can help you handle the numerous financial situations you will be dealing with as a business owner.
Stay ahead of the game with smart and savvy thinking and a proactive approach. Take advice from those who have successfully launched their business and are still going strong. If you start your business off right, you can feel more confident in creating a healthy financial future and a business that flourishes.
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