How To Build Credit for Your Growing Business
Every business owner will need to borrow money to finance projects at some point. This could involve taking out a business loan, using credit cards to pay for inventory, or even borrowing money from investors. Regardless of the method you choose, you’ll want to have an established business credit score to get the best deal possible. Building credit for your business doesn’t have to be tough. Here are a few things you can do to start building a solid credit history now.
Incorporate Your Business
Before you can build your business’s credit, you need to make sure it’s treated as a separate entity. This means you’ll want to incorporate your business with your local and state government. Incorporation allows you to separate your business’s credit history from your personal credit history. The best thing you can do is speak with an attorney to discuss the benefits of each type of business classification. Choose the one that offers you the most benefits.
Separate Your Personal and Business Finances
When you’re first starting out, it’s tempting to combine your personal and business finances into one bank account. Unfortunately, it can really hurt your ability to build your business’s credit history. Instead, open a dedicated business bank account and use it for all business-related payments and deposits.
Open a Business Credit Card
You build your personal credit score with a credit card, so why not do the same for your business? Open a dedicated business line of credit or request a business credit card from your preferred bank. Use this card for regular expenses and do everything you can to pay the balance off in full each month. This way, you’ll show the credit bureaus that you’re responsible. Once they see that you’re making regular payments, you’ll build your credit score up.
Pay Your Bills on Time
Every business will have at least a few recurring bills each month. Those bills can help establish your credit history so you can start building your credit score from day one. Make sure you pay your bills on time each month and pay them off in full. If you ever need to make a late payment, call the company and let them know. When you’re able to communicate any potential issues ahead of time, most companies are willing to be flexible and won’t leave a derogatory mark on your account. The fewer derogatory marks you have on your account’s history, the better your credit score will stay.
Keep these tips in mind and you’ll find that building credit for your business is easier than you think.