In business, credit is everything. Without a good credit score, business owners would not have the reputation to help them expand and grow their business without bootstrapping. If you are a business owner just starting out, you probably do not have any business credit built up just yet. This can be problematic in the future. Find out how to build business credit in this post to establish yourself as a trustworthy loan-recipient for future business growth.
If you have not already, you need to incorporate your business as an LLC. When you own a sole proprietorship or a general partnership business, your personal finances are not separate from your business finances. Thus, you will not be able to establish business credit independently of your own personal credit history. Incorporate business as an LLC to enable yourself to build business credit separate and apart from your own personal credit rating. This is the first step to establish credit for business.
Get An EIN
Next, you need to apply for an employer identification number, or EIN. EINs are distributed free of charge by the IRS. This identifies your trucking business entity for tax purposes. Without it, you will not be able to establish your own business credit. Make sure you apply for an EIN right after you incorporate your business. Then, you will be able to build business credit legitimately.
Open A Bank Account
Open a business bank account. This is the first way to start building business credit without taking out any actual credit. Make sure that you open a business checking account, not a savings account. Then, use this business checking account to make all your payments for business expenses. This is the easiest and most convenient way to start building business credit to enable your business to take out loans for business expansion down the road.
Open Trade Lines
The next thing you can do is start establishing trade lines between your business and other vendors. Trade lines are just another word for business lines of credit. When you open a line of credit between your business and a vendor, like a office supply company, you are steadily building credit for your business. Only open trade lines with a vendor you do business with anyway. That way, this is another easy and convenient way to build credit for business.
Apply For A Credit Card
After doing all of the above, you will be ready to apply for a business credit card. Ultimately, this will be the absolute best way to build business credit over time. Just be sure to pay your monthly credit card bills on time. If possible, pay off your business credit card balance each month as well. By taking these steps, you are sure to establish a good business credit score that will only improve with age.
If you are a new business owner, establishing business credit should be a priority for your business financial health so that you do not wind up in a sticky situation similar to the Canadian debt. Without a good business credit history, you will not be able to procure loans for future business expansion or other company improvements. Build business credit using the financial tips detailed above. Then, you will build up the perfect business credit score to help you experience years of business growth and success.