business credit building

10 Step Business Credit Building Checklist

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Are you trying to build a credit history for your business? Securing finance can often be just as easy as it would be for a personal loan. However, first, you need to know how to build a business credit history.

This can be done quickly, but you must be sure to do it properly and follow the correct steps. Below, we provide our guide to business credit building.

1. Register as an Entity

When businesses are small and starting out, it can be tempting to use the proprietor’s details as contact information. However, you will only be able to get business credit if you are a registered entity. This is because it can get extremely messy if your business and personal finances begin to get mixed up.

Without legal and financial separation between you and your business, all applications will need to have your own social security number. This will give them your credit rating, not that of your business. This may be beneficial if you have good credit but anything that goes wrong in your business will also be reflected in your personal rating.

2. Get an Employer Identification Number (EIN)

The EIN number is used by the IRS to track the tax purposes of a business. It serves the same purpose that your social security number does, but for businesses. Once you have it you can start credit building for your business.

Getting an EIN is free and very easy. You can do it immediately on the website of the IRS. Having one will allow you to get business financing and qualify for credit products.

3. Open a Business Account at a Bank

Opening a business banking account is another way to separate personal and business banking. It will allow credit agencies to see what is going in and out of your business account, making decisions on if they should grant you credit easier for them. You will first need an EIN to open an account.

Be sure to shop around for the best offers when opening a business account. You should use it to pay for all of your business expenses, from rent to wages.

4. Get a Business Address and Phone Number

A business address and phone number add another layer of legitimacy to your organization. Even if you are working from your home study, you can set up a virtual office. You can also use VoIP services for your phone.

Most credit agencies will source their information from local.com and YP.com. That is why it is important to submit your details to these sites. For this reason, it is important to get your information correct on these web sites.

5. Business Credit Building With a Credit Card

Once you have a bank account for your business, it should be easy to get a business credit card. The catch is that a brand new entity will not have a credit rating, so will struggle to get approved. Instead, they should opt for a secured card.

Secured cards require a deposit and this will decide upon the credit amount the card will supply. Even if it is low, you should still go ahead and do it. Using the card and paying it off quickly will show a positive credit history.

6. Establish Credit Lines With Vendors

There are many major vendors that can supply your organization with lines of credit. They will allow you to have a Net-30 credit line, in which you can pay a few days or weeks after you have received goods from them. As long as you pay before the date or on time, you will get good business credit.

FedEx, Home Depot, and Staples are some of the organizations that will do this. You may also want to consider getting a case card if you have company vehicles, as these do the same thing. Ideally, you want to aim to work with around five external vendors who can help you build your rating.

7. Make Sure Equifax and Experian Know You Exist

Equifax and Experian are two of the main credit bureaus for businesses. They will only create reports built on already existing data, so it is not possible to contact them and ask them to build you a file. You must ensure that your business name, address, and phone number are listed on all the major directories.

In addition to this, opening the secured credit card and having vendor credit that is reported to the bureaus will build your standing. This will mean they will build a file for your business credit.

8. Establish a DUNS Number

One credit organization you can contact to open a file is Dun & Bradstreet. They will assign you a DUNS number, which is free. While many of their other services are paid, you will not be charged for the issue of this particular number.

As one of the main credit bureaus, their PAYDEX score is used by many lenders when establishing your credit score. Combine this with the data built up by Experian and Equifax to enhance your credit rating.

9. Avoid Multiple Applications

Don’t apply for credit in multiple places at once, or over a short period of time. All of these applications are logged and will send the message that your business may be in trouble. This will in turn make lenders less likely to give your credit.

10. Lend Responsibly

Steady and responsible borrowing habits will see your credit rating grow quickly. Draw from a mix of lenders, businesses, and bureaus, and make sure you pay back on time. Just one late payment can totally reset your credit history.

Apply to Business Loans Companies

Business credit building is not easy, but you can do it. Remember to stay responsible and use your funds wisely. If you still need some assistance, you can always search for specialist business loan lenders.

Credit Savvi is a specialist company that can help you get startup capital. We can compare offers from over 1000 lenders with only one application. Click here to apply for funding, so we can help with investments in your business starting today.

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