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How to establish good business credit

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In today's fast-moving economy it is crucial for a business to establish credit, as quickly as possible. In addition, to being able to purchase needed supplies, run day to day operations and take care of all aspects of the business, it is also the best way to manage business finances. 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. Here is what you need to know about how to establish good business credit-

  • Start by forming a corporation-The first step to begin to establish good business credit, is when a business owner forms a corporation, or a LLC, for their business to operate under. This is because when they form a corporation, the business owner's personal credit information, will be separate from their business' credit information. This opens the door for 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 EIN from the IRS.
  • Register your business-This is an often overlooked but very important step. After creating a corporation or an LLC, the business owner should then register their business, with the business credit bureaus. The importance of this step is that registering with the credit bureaus, puts the business name with the credit bureaus. When this happens 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.
  • Know the requirements-The business owner will need to comply with all of the requirements of the business credit market, for a business to be able to establish a credit history.This is the best way for the business owner to be able to get the credit that they need, for their business to be successful. Keep in mind that 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 in turn lead to the business not getting a loan, or other needed financing.
  • Get the credit-It seems obvious that in order to establish good business credit, a business will first need to get credit. However, to do this a business owner must take some action such as: write a business plan as well as preparing 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. If the business has no business credit history, at all, 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. This can be a difficult task.However, 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, which will be willing to lend them money.
  • Always pay on time-This is perhaps the most crucial step in maintaining good business credit. After a business owner gets credit they need, for their business, they also 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 the business credit history that they are trying to establish.
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