If you just started a business, establishing and building a strong credit score is essential, especially if you’ll need some financial assistance. Unfortunately, getting loans and other forms of financial support is a struggle for new businesses. Banks, especially, are hesitant to lend to small businesses that haven’t created a favorable credit history. Many small business owners who apply for financial assistance walk away with nothing. Are you a business owner and wondering how to build credit for your business? Here are four ways to establish strong business credit and increase your chances of getting financial support.
- Put your business on the map with a legal identity
Registering your business alone isn’t enough to make your company a credible one. Establishing your business as a separate legal entity in your state is also best. You want your potential financiers and sponsors to know that you pay your dues regarding tax. You should either set up an LLC or incorporate your business. Doing this depends on what you consider best for your situation.
Next, you should consider getting an Employee Identification Number (EIN) by visiting the IRS website. This number will add credibility to your business and make processes such as opening a bank account and filing taxes easier. If you haven’t obtained one yet, you can learn more about how to get an EIN number and its benefits for your business.
- Open a business bank account
Opening a business bank account does two main things for you, among other benefits. One, it allows you to get a business credit card and establish a relationship with a bank. Some banks already have attractive financial packages for new or small businesses that open accounts with them. So, you’ll want to keep that in mind when picking an ideal bank for your business.
The second main benefit of opening a business bank account is that it allows you to separate personal finances from your business. This way, you can avoid using a personal credit card for your business while enjoying other benefits of having a business account.
- Pay your bills as early as you can
Paying your bills on time or even earlier than their due dates is always advisable. While with personal credit, you may have a grace period of about thirty days, for example, to make payments before it affects your credit, it’s not the same for business credit. Even a day late can cause your business credit score to take a big hit, affecting your ability to attract financial assistance from lenders. Paying your bills before their due date is one of the best ways to build an excellent credit score.
- Take the time to set up your business
If your business is new, take the time to establish it as a credible and reputable entity. Aside from getting the needed registrations and IDs, it would help if you also build a trustworthy relationship with your clients and suppliers. Additionally, it would help if you got a business office, an address, a dedicated business phone number, and so on. These are important because such details may appear on your business credit reports.