Did you know you can build business credit? Being able to borrow money for company requirements and costs such as new equipment, building improvements, and so on is vital to having a successful business for many entrepreneurs.
You can’t just go out and obtain a company loan without having good credit, just like you can’t get a personal loan without having good credit. While the procedure is slightly different, companies, like individuals, have credit scores. Like people, they require strong credit ratings to qualify for operational loans, low-interest rates on business credit cards, and so on.
As a result, you must focus on establishing business credit as a business owner. Before beginning operations, you must begin the process of establishing credit for your company. To get started building credit right away, you’ll need to do the following:
- The Legal Identity of a Business
Separating your company credit from your personal credit is essential for your firm to establish a strong reputation on its own. To do so, your company must be organized as a distinct legal entity, which can be accomplished by incorporation or the formation of an LLC.
- TIN or Tax Identification Number
The next stage in establishing important credit for your company is to obtain a tax ID number. Your firm, like a person, will require an identifying number to establish credit; however, in the case of a business, this number is known as a FEIN or Federal Employer Identification Number. The Internal Revenue Service will provide it.
- Bank Account for a Company
You may separate company and personal finances by having a business bank account. Furthermore, while seeking business loans, a business bank account can be used as a reference.
- A D-U-N-S Number
A D-U-N-S number is a number that begins with the letters D and ends with the letters S. Businesses utilize the Dun & Bradstreet D-U-N-S Number to verify a company’s credit history. Companies and the federal government in the United States need their suppliers to have a DUNS Number. A D-U-N-S number is one of the most important steps in the process of getting your business registered with the government. By doing business with Dun and Bradstreet-reporting creditors and/or suppliers, you’ll begin to build your company’s credit profile.
Other Factors in Building Business Credit
Aside from these requirements, your business will require a separate phone line and compliance with all state and municipal legislation. You should also apply for a business credit card or line of credit, as this is how your company will first appear in the files of each credit reporting agency.
Following that, establishing strong company credit is similar to establishing good personal credit: paying bills on time, not declaring bankruptcy, not defaulting on loans, and so on.
Building a great and successful business might take a lot of effort, and it’s significantly more difficult when you don’t have excellent credit or any credit at all. You may start developing business credit by performing the actions suggested above. And by adhering to the norms of good credit building, which apply to both individuals and organizations, you can ensure that your company’s credit will continue to improve as it grows and expands.