Processing…
Success! You're on the list.
NEWSLETTER

Processing…
Success! You're on the list.

How to establish business credit for your startup in 3 steps

credit
Picture credit: Pixabay

Having good credit is very important as it can help you get lower interest rates, have a better chance of loan approval, get higher borrowing limits, and more. If your score is low and you are struggling, credit repair companies can help you improve your credit score.

But in addition to personal credit being important, so is business credit. If you are just starting a company, you need to think about establishing your business credit. It helps you protect your personal credit, gives you access to the funds you need to grow, and makes borrowing money a lot cheaper.

Unfortunately, your business won’t have perfect credit immediately and you need to put in time and effort to get there. With that in mind, this article is going to go over a few steps that your startup can take to begin establishing business credit.

Establish and Register Your Business

The first thing you need to do is to legally establish your business. You need to choose the type of business you have (sole proprietorship, corporation, partnership, etc..), create a name, and get an employer identification number (EIN) for tax purposes. You should also consider opening a business bank account.

You also need to ensure that you register your business and get everything else sorted out legally. Different business types will have different requirements and rules can differ from state to state, so do your homework on what is required of your type of business in the state you are planning to operate in.

While all of this doesn’t help you establish credit per se, it is necessary to get everything in order business-wise before you start thinking about credit.

Open a Business Credit Card and Work With Specific Suppliers

Once all of that is taken care of, you can begin to establish your credit. One good way to start is by opening and using a business credit card. There are many different business cards out there, so make sure to consider all options and look at which might provide the most advantages for your business.

In addition to a credit card, you can also work with certain suppliers or vendors. If these suppliers report to the credit bureaus, making successful payments to them will boost your business credit and make you a more attractive borrower in the future.

Make Payments on Time and Manage Credit Successfully

Picture credit: Pixabay

Once everything is in place and you have your card, the best thing you can do for your business credit score is to begin using your credit card each and every month for purchases and then paying it off.

The better you are about making payments, the more your business credit will rise. This is because each time you make a payment, you become less and less risky to lenders as you continue to show you can handle credit.

In addition to making payments, you also want to be aware of other things that could impact your business credit, and manage them effectively. For example, you should make an effort to use no more than 30% of your available credit each month. If your utilization is too high each month, it could be a sign to lenders that you are only a few bad days or weeks away from being unable to pay your bills.

Also, make an effort to monitor your business credit reports and ensure they are accurate and that all business information included in them is correct.

In conclusion, we hope that this guide has been able to help you learn how to establish business credit for your startup.

Related Posts
Total
0
Share

Get daily funding news briefings in the tech world delivered right to your inbox.

Enter Your Email
join our newsletter. thank you