Building business credit is an important aspect of managing a successful business. It can help your business access loans, credit cards, and other forms of financing at better rates, which can be crucial for business growth and expansion. Here are some steps you can take to build your business credit:
- Incorporate your business: Incorporating your business can help you separate your personal and business finances, which is important for building business credit.
- Obtain an Employer Identification Number (EIN): An EIN is a unique number assigned to your business by the IRS. You will need an EIN to open a business bank account, which is important for building business credit.
- Open a business bank account: A business bank account can help you keep your personal and business finances separate, which is important for building business credit.
- Obtain a business credit card: A business credit card can help you build your business credit by demonstrating your ability to manage credit responsibly. Be sure to make timely payments on your business credit card to build a positive credit history.
- Get a D-U-N-S number: D-U-N-S is a unique nine-digit identification number assigned to businesses by Dun & Bradstreet, a business credit reporting agency. Obtaining a D-U-N-S number can help you establish your business credit profile.
- Establish credit accounts with vendors: Establishing credit accounts with vendors and suppliers can help you build your business credit by demonstrating your ability to pay your bills on time. Be sure to make timely payments on these accounts to build a positive credit history.
There are many ways that you can use business credit to expand your business. Some examples include:
- Accessing financing: Business credit can be used to access financing such as loans or credit cards, which can be especially useful if you don’t have personal collateral or if you want to keep your personal and business finances separate.
- Negotiating better terms with suppliers: A strong business credit score can help you negotiate better terms with suppliers, such as longer payment terms or lower prices. This can help you stretch your cash flow and invest more in your business.
- Renting or leasing equipment: If you need to rent or lease equipment for your business, a strong business credit score can help you secure better terms, such as lower interest rates or longer lease terms.
- Hiring employees: A strong business credit score can make it easier to hire employees, as it demonstrates to potential hires that your business is financially stable and likely to be around for the long term.
- Expanding to new markets: If you want to expand your business to new markets, a strong business credit score can help you secure financing to cover the costs of expansion.
It’s important to manage your business credit responsibly to maintain a positive credit history and access to financing in the future. This means making timely payments on your business credit accounts and keeping your credit utilization low.