How To Build Business Credit Step By Step

Formation of business credit is a vital step for a new business of small size and assists in maintaining a separate credit history from a personal credit history. This way you can enjoy benefits of having good business credit and also can create a distinction between the business and owner.

The Advantage Of Separate Credit Histories

By maintaining separate credit histories for business and personal can reduce the risk of impact of negative happenings in one area from the other. If both are separated from one another, then the negativity in personal credit score should not affect your business credit.

Steps for establishing the business credit:

  1. Incorporation of Business:

Forming a corporation creates a business that has clearly and legal separation from the owner.

In partnerships and sole proprietorships, there is no distinction between the owner and the business. In such cases, the personal business credit history cannot be separated from the business credit history.

  1. Obtain federal tax identification number (EIN)

It is a social security number for a business required for filing tax returns. Opening a bank account also requires having an EIN on the name of the company or business.

Some large business organizations require and demand EIN from their vendors since it is a legal requirement for them to ask for it before paying for their services.

  1. Open a bank account

Next step is to open a business checking account with the business as the title. You should ensure that all the payments are made through this account and not by cash. Even if payments are made through a business credit card, it is imperative that the credit card bills are paid through this checking account.

  1. Get a dedicated business phone line:

Get a new separate connection of a mobile or landline for the business registered in the name of the business. Get it listed in the directory.

  1. Get a business credit card:

Get one or more credit cards which are separate and not linked to you personally.

Choose a business credit card from a company reporting to credit reporting agencies.

  1. Create a line of credit with vendors and suppliers:

Choose more than one vendor and supplier to create credit when purchasing for your business from them. Ensure they report your payment history to the credit reporting agencies.

  1. Payment of bills on time:

Ensure payment of bills on time. Delayed payment will certainly have a negative impact on your business credit.

  1. Get a loan from the online lender:

If you don’t have a good credit history, the banks might refuse a loan to you. You can get small business loans online before signing the documents for the loan.

Going through online reviews and seeking information about business loans online is a good option as it can provide you with useful information. You can also get information about complaints against the providers this way. Also, ensure that the lenders are reporting to national credit bureaus.

Benefits Of Having Good Business Credit

Having good business credit can provide some benefits, including:

Positioning your company for more favorable payment terms with new vendors and suppliers.

Reducing the number of times, you will need to prepay for products or services purchased.

Allowing you to obtain better interest rates and credit terms from lenders and banks.

Once you have established and built good business credit, be sure to monitor and protect it, just as you do with your credit.


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