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Establishing business credit

mansmiling26246769.jpgEstablishing your business credit is one of the most important things you need to focus on when you are getting your business started. Establishing business credit provides you with the ability to show lenders that you are worthy of receiving a loan. New businesses do not yet have business credit and they are unable to do anything in order to receive the money they need from lenders to finance their operation. It can take you 2 years or longer to establish business credit. This article will teach you simple ways in which you can establish business credit and strengthen the financial position of your company.

Strong fundamentals
One of the first things you need to do is to make sure you have strong fundamentals for your business. Make a list of your goals and create a mission and vision for the company. As you focus on strengthening the positioning of your business, you will have an easier time convincing lenders to offer you financing. Having the fundamentals lenders are seeking will improve your position in the industry and help you create a strong name for yourself. This type of positioning is vital to the health of your company.

Build relationships

When you start a business, you need to seek out vendors that will be able to provide you with the raw goods and materials you need to get started. You want to focus on building stronger relationships with vendors in order to boost your business credit and to strengthen your financial outlook. The vendors you work with will post information to the credit bureaus about your repayment capabilities, allowing you build a stronger business credit rating. Research the vendors that actually report information to the credit bureaus if you want to build business credit. Try to gather and build relationships with at least 5 vendors in order to strengthen your business credit rating.

Acquire business credit cards
Once you have a few vendors to work with, you want to focus on acquiring business credit cards. You need to look for lenders that will offer you a credit card even if you do not have business credit established. Since this can be a challenge, you may want to consider looking into secured business credit cards. Secured business credit cards are a simple way to build business credit. You will make a monthly deposit to the credit card each month and you can only spend up to that deposit amount. Secured credit cards work, but it's a slow way to start building business credit.

When you acquire business credit cards, make sure they are not tied into your personal credit at all. If you are constantly falling back on your personal credit to help you establish business credit it can take years to separate the two. Try to acquire at least 2 business credit cards as they will help you build your report faster. You do need to be careful about the card you get as most of them will come with a high interest rate initially. Make sure you aren't maxing out the card and that you are able to repay the money you borrow in a timely manner.

Legal documentation
A big part of your business credit report will come down to the legal documentation you have established. You need to file for a state business license and you must set up all of the paperwork required by your state. Typically they require your incorporation papers, legal business name, address, phone, and other contact information. You must also file for an Employer Identification Number EIN from the government in order to operate your business.

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