10 Tips to Help Establish Business Credit

One of realities of business is that you have to have credit in order to function properly. This means that you will need to build a business profile that is separate from your personal profile. However, it isn’t always easy to build business credit. The good news, though, is that it is possible. Here are 10 things that Focus magazine suggests can help you raise your business credit profile:

1. Come up with a good name: An identifiable name that describes your business is a good idea, since it means you are more likely to be found. Make sure that it works well on the Internet as well.
2. Create a good business plan: Think about how you will grow your business and be able to present it. “Costs” isn’t going to cut it. Know what your expenses will be, and be able to show how you plan to generate the cash flow to pay back any loans you get to cover them.
3. Set up your business properly: Research different types of business organizations, and pick one that will work well for you. Consult with an attorney or an accountant to determine whether a C or S corp. is best for you, or if maybe you should go with the LLC.
4. Get your EIN: As soon as possible, apply for your Employer Identification Number from the IRS.
5. Avoid using your personal credit: Although tempting, it is better if you can get credit without using your personal credit rating. A failed business attempt could wreck your personal rating — and affect your ability to start a business in the future.
6. Open a business banking account: If you have a business checking account, it can help you portray an image of financial stability. Local banks and credit unions may be able to help you more than the “big guys.”
7. Get a DUNS number: This is basically the business version of a business credit tracking number. It does cost money to apply for this number from Dun & Bradstreet, but it is usually worth the expense — and you can claim the cost on your taxes.
8. Use your DUNS as you build good relationships: Build relationships with other businesses, through trade. Suppliers should open accounts in your business account and with your DUNS number. That way, your good habits can be reported properly.
9. Pay on time: This should be obvious. You need to make on time, in full payments to build good business credit.
10. Get a business credit card: You can get a business credit card and use it for small purchases. This strategy is similar to using a personal credit card to build a credit history. Just be careful not to get in over your head.

Image source: Channel R via Wikimedia Commons