How to establish credit for your business
Many business owners often overlook the need to quickly begin establishing business credit. However, the reality is that at some time your business will need to fall back on its credit. You should not let the demands of getting your business up and going supersede the need to establish business credit.Having credit for your business can often make the difference between its survival and its quick demise. Few businesses today, can survive without some form of credit to purchase inventory, pay bills, and run the day to day operations of the business. While this can be a time consuming process it is a crucial process for the long term survival of your business. Here is what you need to know about how to establish credit for your business-
- Have the right legal documents-You should never overlook any of the required legal steps of establishing your business. Whether it is registering your business, setting up a charter, or some other requirement that is unique to your area you should make sure that all required steps are taken. Lenders in your area will be very hesitant to extend business credit to you (or may even refuse to), if you have not complied with all legal requirements in the establishing of your business. You should consult with an attorney or other business professional if you are unsure of what you need to do.
- Establish a strong base for the finances of your business-You should always be monitoring the finances of your business and making sure that they are in the healthiest state possible. It can be helpful as part of your business plan to write down your financial goals and how you will achieve them. Not only does this help you focus your actions on helping your business succeed potential lenders will impressed that you have a plan of action as part of your business plan. You want to make sure that you are doing everything you can to position yourself and your business as a leader in your industry.Keep in mind that any potential lender will be looking at all aspects that concern the finances of your business so you need to have them in the best shape possible.
- Have good relationships with your vendors-One of the best ways to establish business credit is to have a good relationship with your suppliers. The best way to do this is to pay your bills on time. Keep in mind that your vendors will most likely be reporting your creditworthiness to the credit bureaus. If you are an on time payer this will help to increase your business credit rating. In order to help build your business credit rating it is recommended that you work with at least 4-5 different vendors who will be reporting to the credit bureaus.
- Get the right business credit cards-Once you have begun establishing your business credit rating through good payment history with your vendors then it is time to take out some business credit cards. The good news is that there are some lenders who will allow even a very new business to take a business credit card. However, keep in mind that this card will most likely be a secured credit card. If you use this card wisely and prudently, and most importantly pay it off every month you will soon be able to get an unsecured credit card with even better terms for your business. Finally, you should make sure that your business credit cards are not tied to your personal finances in any way. You should always keep all financial matters of your business completely separate from your personal finances.