Understanding how to build business credit can help to reduce insurance rates and get your company approved for business loans. Building credit for a business takes some time and planning. It leads to more opportunities for obtaining greater amounts of capital, which is particularly important if you intend to scale up your operations.
Reasons to build business credit
There are various benefits of building business credit. It allows a small business owner to establish and maintain a credit history that is separate from her personal credit history. A legitimate business's credit is not directly based on the owner's personal credit score.
5 steps to build business credit
Consider the following for establishing a credit history for your business:
Federal employer identification number (EIN)
You can think of an EIN as a Social Security Number for a business entity. This number is required to form a corporation or LLC, file federal taxes, or open a business bank account. This IRS
process is free.
Business bank account
Once you have an EIN, it is good advice to open a business checking account. Be sure to use the legal name of your business as you will advertise it. It's also imperative to pay every bill in on-time and be very meticulous about keeping this account in perfect shape.
It is much more difficult to build business credit with a sole proprietorship or general partnership because they typically operate in the owner's name. Incorporating a business or forming an LLC establishes the business as an entity that is legally separate from those who own or control it.
Business phone number
Set up a separate phone number for your business. List it in relevant directories under the same business name as your business bank account and EIN. This can a cell phone, landline, or VOIP number. Make sure it remains paid and operational.
Business credit file
Establish a business credit file with the major credit reporting agencies: Dun & Bradstreet, TransUnion, Equifax, and Experian. Always pay your bills promptly and don't get overextended. Business Credit Advisors
specializes in helping new and established business owners build business credit and obtain business funding. Contact our friendly team today to discuss how we can help you achieve your business goals. We are passionate about helping small businesses to grow in the exciting modern economy! Sources IRS Credit Karma