Banking.jpgIf you’re starting a business, you never know what difficulties lie ahead. Whether you plan on taking out a loan or not, it’s best to prepare your business by building business credit. Having business credit is essential, especially so that you don’t have to fall back on personal credit if anything happens to your business. Your personal and business credit rely on separate tax ID numbers that help to keep the two separate. Having separate lines of credit decreases your liability due to the fact that your personal credit cannot affect your business credit and vice versa. If your personal credit is at risk, you won’t lose your business. If your business credit is at risk, you won’t lose your house.

To have business credit, there are certain requirements though. This includes operating as a corporation or limited liability company (LLC) rather than a sole proprietorship or general partnership. Deciding what type of business structure your business will be is no easy task, but luckily there are plenty of guides to help you through it.

Getting Started

Make your business a business. This may sound funny, but your business is not legally a business in the eyes of a bank or the IRS until you complete these steps from the U.S. Small Business Administration. If you’ve already completed this step for your small business, nice work. You’re one step closer to building credit for your small business.

Obtain a federal tax identification number (EIN). Although you have a social security number, your business needs one too and an EIN is the identification numbers of a business for the IRS. To obtain an EIN, you can apply here through the IRS.

Obtain a business phone number. Maintain a clear separation between business and personal identity by getting a phone line specifically for your business, which is especially important when your business’s number is to be listed in the directory.

Open a checking and savings account. Under your business’s legal name, open an account from where you can pay for the financial transactions of the business. Even if you decide to get a credit card for your business, paying the bill from your business’s checking account is essential.

Open a business credit file. To open a business credit file, register with the free reporting agency, Dun & Bradstreet. Visit their website to get started.

Get a business credit card. Choosing a credit card for your business is not as simple as you’d think. To get the best deal, consider expenditures, lifestyle, annual fees, and fringe benefits.

Establish credit with vendors or suppliers. The best way to establish credit with a supplier or vendor is to simply pay on time. To speed up this process, you can work with suppliers who report credit, ask for a little credit, pay early consistently, and ask for better terms such as a net-20 or net-30 plan.

Pay your bills. Similar to personal credit, paying your bills on time will keep your credit score intact. It’s simple and yet continues to ruin credit scores, so don’t make the mistakes others make by paying late.

Whether you’re a startup or a small business looking to get serious, get your business’s credit in check. With credit scores ranging from 0 to 100, use these simple tips to get your business started and keep your business’s credit score high!

Stay connected.

Enter your email below to stay up-to-date on Humboldt news and articles

`
`