When you have just started a business, one of the things you should make a priority is to establish credit for your business. Once you have established your credit, lenders will be able to loan your business money without having to consider your personal credit or without it having any effect on your personal credit. Here are some tips you can follow when establishing your business credit profile.
Make Sure You Have the Right Business Structure
Before you begin trying to establish credit, it’s important that you make sure you have the right business structure. You don’t want to have a sole proprietorship because it doesn’t distinguish between you and your business. This would defeat the purpose of trying to establish business credit. You should have a partnership, LLC or create a corporation, for example.
Create a Professional Image
You need to establish your business as a professional entity. You can do this by opening a business account and creating an entry in the yellow pages. You also should get any professional licenses required and make sure to register your business name.
Manage Your Accounts
With personal credit, it is largely based on loans and other accounts, but this is not how it works for a business. With businesses, your credit is established based on your accounts, like your vendor accounts and even utility accounts. So, it is very important that you make sure you are managing your accounts and paying them on time.
Watch for Mistakes
When you are establishing your credit, make sure that you pay attention to what is happening with your reports and rating. It is fairly easy to fix your personal credit report or rating if there is an error, but this isn’t true for businesses. So, you have to be sure it is established correctly from the very start.
Be Careful With Credit Cards
Once you start establishing your credit, you will likely get credit cards. Just as with personal credit cards, you need to be careful not to run them up or get yourself too much into debt. Not only will this affect your credit but it will also affect your rating.
Establishing business credit isn’t always as easy as establishing your personal credit. You are basically creating a new entity that is starting from scratch. You have to make sure that you are careful to create a professional image for your company that will be recognized as an entity and that you make sure you are doing things that will reflect positively on your business creditworthiness.