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Tips for establishing business credit

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A very important part of any successful business is business credit. There are many reasons why a business owner may need to get some type of financing throughout the lifetime of their business. For example they may want to start a new product line, or expand their business. To do these things the business owner will likely need some type of loan and having business credit will help them get the loan they need. This article discusses tips for establishing business credit.

Separate

One tip for a business owner to establish business credit is for them to start out by separating their business credit from their personal credit. This is a very important tip because if a person's business was to fail, they would not want their personal credit to be ruined as well. The opposite is also true. If for some reason a business owner's personal credit were to be destroyed, they would not want that negatively impacting their business credit.

The first step for a business owner to separate their business credit and their personal credit is for them to form an LLC or incorporate. Then they will need to get a Federal EIN, get the business licenses and permits they need, and open a bank account that uses the legal name of their business. The business will also need its own phone line that is listed under the business' legal name.

Reporting credit

For a business to establish credit it needs to be reported. A business owner is going to need to open their own credit file with each of the three business credit reporting agencies. A business owner will then need to contact at least five of their suppliers or venders and see if they will extend a little bit of credit to the person's business. If they are willing to extend the credit, the business owner should make sure that they will also report the payment histories to the business credit reporting agencies. This will definitely help a business establish credit.

When a business gets a business loan, whether to start up the business, or to expand, etc. it is important that the business owner makes sure that the bank they are borrowing from reports. If the bank is not reporting then the business owner's business loan will not help them establish credit.

Credit cards

Another tip to help a business owner establish business credit is for them to get business credit cards. A business owner should get at least three business credit cards. These business credit cards should not be linked to the business owner personally. The business owner should also make sure that the business credit cards that they get are also reported to the business credit reporting agencies so that they can establish business credit that way as well.

Pay on time

Another important tip for a business owner is for them to pay their loan payments and credit card payments on time. It will not help the business if the business owner gets the three credit cards that report, has a loan through a bank that reports, and has suppliers and/or venders that report to the business credit reporting agencies if the business owner is not making their payments on time. In fact, it will do just the opposite of help; it will most likely hurt the business.

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