There are several steps to establish business credit for new business entities. Business credit verifies your organization’s ability to deal with income, purchases and debt. Strong credit is something built overtime. In fact, having good business credit can lower insurance premiums for companies. As a new business owner, you should understand how to establish strong credit for your company. Of course, you should also discover how to find the best credit union for small businesses. This way, you can qualify for lower interest rates on loans, products and services. Read on to learn how to establish business credit for new business entities.
Establish Your Company
First, establish your company to build business credit for your new entity. To start, define your business as either a sole proprietorship, corporation, LLC or a partnership. You should also choose a legal name and set up a company phone number. This way, you can gain credibility with suppliers and government officials. Then, you should open accounts with vendors that report their data to the major credit bureaus. This will create your credit file so you can start building business credit. In addition, this also makes your company known to all credit reporting agencies. Surely, you should establish your company to build business credit for new business entities.
Get An Employer Identification Number
Once you establish your company, obtain your employer identification number (EIN) to establish credit for your new business. Such as getting a vanity number identifies your business’s phone number, your EIN will identify your business’s tax accounts. You can get your free EIN if your company is incorporated in the United States and meets legal requirements. EIN requests are available on the IRS website, via fax or by mail. You’ll need this unique number to file your company’s taxes. In addition, an EIN is required to open business bank accounts and credit cards. This number is also required to apply for business loans from banks and other financial institutions. Of course, get your employer identification number to establish business credit for your new company.
Open A Business Bank Account
Once you get your EIN, open a business bank account to build business credit. Ideally, you should only use this account to pay for business expenses. These can include utilities, rent and internet services. In addition, you should pay your bills in full and on time. This way, you can build credit for your company. Additionally, a bank account with good standing can provide a strong reference to major credit reporting agencies. Then, it’ll be easier to get approved for more advanced credit accounts. Plus, the best business lenders are more likely to approve loan requests. In short, open a bank account for all of your business expenses to establish credit.
Apply For A Business Credit Card
Then, applying for a business credit card is a great way to establish business credit. Notably, you can still apply and qualify for a card if your new company hasn’t established credit yet. Indeed, most credit card companies use your personal credit score and income to determine if you qualify. Explore credit card options that send your information to the major reporting agencies. In addition, consider different cards, such as Capital One Spark Business, with perks such as cash back and travel rewards. Ideally, you should open as many cards as you can handle to build your credit worth. Of course, use caution when you open multiple credit cards to avoid overextension. This way, you can manage your credit score avoid debt. Certainly, apply for a business credit card to establish business credit.
Furthermore, the last step to build business credit is negotiating tradelines. You can establish tradelines with third-party vendors who you buy company supplies and materials from. For example, set up tradelines with your water company, office supply distributors and service providers. Often, these vendors can extend your trade credit. This means you’ll have several days or weeks after your purchase to pay for your inventory. In addition, they can report your payments to the major business credit bureaus. This can boost your credit score if you stick to your terms and agreements. More so, you can list any vendors who don’t report to credit bureaus as trade references on your account. Definitely, negotiate tradelines to build business credit for your new company.
There are several steps to establish business credit for new business entities. First, establish your company to gain credibility with other vendors and government officials. Second, you need to get an employer identification number from the government. Next, open a business bank account to build credit with reporting agencies. Then, you should apply for a business credit card to establish creditworthiness. Furthermore, you can negotiate tradelines with your vendors to report payments to credit bureaus. Follow these steps to establish business credit for new business entities.