How to Establish Business Credit
Did you just embark on your entrepreneurial journey and open up a small business? If that's the case, while it may seem like you're trying to establish a million things at once right now, there's one thing that you may not want to skip.
Establishing business credit.
Before we explore separating your business and personal credit, let us not forget what credit in itself is - it's your financial power. More specifically, the ability to borrow money with the promise to repay it in the future.
With that in mind, it turns out that there are advantages to opening separate lines of credit for your business. Establishing business credit prevents your personal credit from affecting it and vice versa.
That being said, there are many ways to begin building credit. You may not realize it, but a number of different factors play into how you can develop a credit history for your business:
Business Credit Card
An easy way to start is with a business credit card - use it for all purchases and pay the balance in full each month. These cards are usually reported to at least one commercial credit agency.
Line of Credit
You can also consider using a business line of credit. Lines of credit are often used to purchase equipment or supplies, and they also give you the ability to make larger purchases than if you were to only use a credit card. Simply having the option to make larger purchases will help you build good standing with lenders.
Taking Out A Loan
If you intend to take out a loan for your business, you will have the chance to establish good credit history from the very beginning. If your business has been around for several years and does well, then it's even more likely that a bank will be willing to lend you money. It's also important to note that in order to take out a loan for your company, banks will want proof that your company has been operating for at least two years and has steady income.
Having Separate Accounts
You'll be able to build up solid business credit if you open up separate accounts for operating expenses and payroll. You can even open an account that is solely designated as your company's checking account.
Operating accounts are used for things such as utilities, rent, and other expenses that need to be paid regardless of whether or not you receive payment from customers. Payroll accounts are used for your employees' wages and taxes. When you're starting out, it can be tempting to put all of your business expenses into one account and pay the bills from there, but this can do a number on your credit history.
It Doesn't Need to Be Complicated
Tactful stewardship is the key to building and maintaining good business credit. Plus, knowing what options are available could help you get approved faster with fewer obstacles along the way.
Ready to get some capital for your small business? Apply here at Click-N-Loans.com or call us at (561) 525-5497 to speak with a funding specialist today!