If you run a small business, access to credit can be a lifeline when your business is in trouble and an invaluable tool when an opportunity arises. However, it is necessary to have a good business credit history so that lenders are more likely to work with you. The following strategies can help your business shine in this regard.
Establish Credit for Your Business
Early in your company’s life, you may need to take some preliminary steps to begin establishing business credit. These steps include:
- Forming an LLC or incorporating your business, which will separate your business and personal identities.
- Obtaining a federal employer identification number (EIN), available from the IRS here.
- Getting a business phone line and opening a bank account for your business.
- Obtaining a D-U-N-S number by registering with Dun & Bradstreet.
Business credit-monitoring agencies use your EIN and D-U-N-S numbers to help build credit reports.
Get a Credit Report
Another early step in building credit is finding out where your business stands. For a fee, you can obtain a business credit report from any of the big three credit-monitoring agencies who handle such matters: Experian, Equifax, and Dun & Bradstreet. From there, you can take steps to correct errors in your credit report and identify areas of weakness to work on.
Apply for a Business Credit Card
If you obtain a credit card for your business, use it responsibly, and diligently make the monthly payments on it, the credit card provider will pass favorable data on the credit-monitoring agencies. In turn, that will reflect well on your business’s history of credit usage.
Pay On Time or Early
Vendors are also a source of data for the credit-monitoring agencies. That means paying them on time is essential. Additionally, to reach the highest possible rating with Dun & Bradstreet, you need to pay vendors early—though it is still possible to obtain a good score by just paying on time.
For more information on how the business world works, take a look at Elevation Financial‘s other blog posts.
