Did you know that the U.S. offers the best environment for entrepreneurs in the world?
With the right vision and the right amount of capital, anyone can start their own business.
However, there's one other thing that successful entrepreneurs need: business credit. Good business credit is essential for securing funding in the future.
If you have poor personal credit, you may be worried about your prospects of being an entrepreneur.
However, you actually don't need flawless credit in order to build business credit! Keep reading for tips on building credit without a FICO score of 800.
1. Establish Your Business
In order to start building business credit, your business must first be established. This enables credit bureaus to actually generate credit reports for your company.
It also helps you to effectively separate your personal and your business credit!
Once you have incorporated your business or set up an LLC, you'll be able to claim a federal employer identification number (EIN). EINs are official designations for business entities.
Next, set up separate banking for your business. Open a business checking account and credit card and use these only for business purposes. You may also want to open a savings account for your company.
2. Consider Trade Lines
To start building business credit, consider opening trade lines with various vendors. These are accounts held with suppliers that enable businesses to pay invoices within a certain period of time. They may also provide lines of credit.
Some vendors will report trade line activity to credit bureaus. This is important for building credit, especially if you can demonstrate that you're a good borrower!
Now, these suppliers and vendors don't have to report trade lines to credit bureaus. It will be worth your time to set up trade lines with vendors who do report, so check with them before doing so.
3. Build Your Personal Credit
Your personal credit still matters, especially if you want to apply for a business loan. Some lenders do consider entrepreneurs' personal credit when making funding decisions!
While building your business credit, take steps to improve your personal credit. Begin by requesting a free copy of your personal credit report from any of the three credit bureaus: TransUnion, Equifax, and Experian.
Work on paying all of your bills on time, including minimum payments on credit card accounts. Keep your credit utilization as low as possible, and consider debt consolidation to reduce monthly payments.
Find more tips about maintaining good credit here.
4. Pay Everything On Time
It is vital to pay all of your bills on time when building business credit. If possible, pay early!
Missed payments can tank your business credit. If you default on a business loan, this could bar you from future funding opportunities--or at least good rates for loans.
5. Regularly Inspect Business Credit
Keep tabs on your business credit at all times. We recommend inspecting your business credit report often.
This is because errors do occur, and fixing them now can mean preserving some precious points. When checking out your credit report, make sure all contact information, financial data, and public records information are correct.
Business credit matters, but you can still build it with a mediocre personal credit score! Keep these tips in mind in order to do so.
Is your startup in need of some working capital? Funding is available! Learn more about your options now.