Establishing good business credit

One of the best business finance tactics is for a business owner to establish good business credit. When a business establishes good business credit they are able to get the business loans and the credit they need to build a successful business. This article talks about six things that a business owner needs to do to establish good business credit.

Forming a corporation

To begin to establish good business credit, a business owner should form a corporation-or a LLC- for their business to operate under. When they form a corporation the business owner's personal credit information will be separate from their business' credit information. This allows the business to have its own credit card and for the business owner to apply for business loans using the business' credit profile etc. A business owner will also then be able to get an FIN or an EIN from the IRS.

Register

After creating a corporation or an LLC, the business owner will then want to register their business with the business credit bureaus. Registering with the credit bureaus puts the business name with the credit bureaus so that the business owner will be able to start establishing credit for their business and have it documented to create a credit history for the business.

The requirements

For a business to establish a credit history, the business owner will need to comply with all of the requirements of the business credit market. This is the best way for the business owner to get the credit that they need for their business to be successful. Many times if a business does not comply with the requirements of the business credit market lenders and the credit bureaus will see red flags on the business. This may lead to the business not getting a loan, etc.

Getting credit

To establish good business credit, a business will first need to get credit. To do this a business owner must write a business plan as well as prepare any financial statements that will help them get a loan. Most banks and other lending institutions are going to require a business owner to have these documents before they even consider lending them any money.

Since the business will have no business credit history, the business owner needs to find a bank or other lending institution that will be willing to lend their business money even without a business credit history. If a business owner has a terrific business plan as well as financial documents to back up their plan, there are banks and lending institutions who will be willing to lend them money.
Report

It is very important for a business owner to make sure the bank or lending institution reports the different payment experiences with their lenders, to the business credit bureau. This is the only way that the credit bureaus will find out about the business' credit and help the business establish a business credit history.

Pay on time

After a business owner gets credit for their business they need to make sure to pay off their debt on time so that they establish a good business credit history and not a bad business credit history. If the business owner misses payments, or makes late payments it will negatively affect their business credit history that they are trying to establish.