Business Funding Sources Are Better with Business Credit
Of course business credit is a terrific form of business funding. Company credit is credit in a business’s name. It doesn’t link to an entrepreneur’s personal credit, not even when the owner is a sole proprietor and the only employee of the company.
Therefore, an entrepreneur’s business and personal credit scores can be very different.
The Benefits
Given that business credit is separate from consumer, it helps to protect a business owner’s personal assets, in case of court action or business insolvency.
Also, with two separate credit scores, a small business owner can get two separate cards from the same merchant. This effectively doubles purchasing power.
Another advantage is that even start-ups can do this. Visiting a bank for a business loan can be a formula for frustration. But building business credit, when done correctly, is a plan for success.
Personal credit scores depend upon payments but also other considerations like credit use percentages.
But for small business credit, the scores really only hinge on if a small business pays its bills promptly.
Business Fundability
Growing company credit is a process. A company needs to be fundable to lending institutions and vendors.
Due to this fact, a business needs a professional-looking web site and email address. And it needs to have site hosting from a company such as GoDaddy.
And, business phone numbers should have a listing on 411. You can do that at ListYourself.
At the same time, the company phone number should be toll-free (800 exchange or the equivalent).
A business also needs a bank account devoted solely to it, and it has to have all of the licenses essential for operation.
Licenses
These licenses all must be in the particular, correct name of the small business. And they need to have the same company address and phone numbers.
So bear in mind, that this means not just state licenses, but possibly also city licenses.
Working with the IRS
Visit the Internal Revenue Service website and get an EIN for the company. They’re free of charge. Pick a business entity like corporation, LLC, etc.
A company may get started as a sole proprietor. But they should switch to a kind of corporation or an LLC.
This is to decrease risk. And it will make the most of tax benefits.
A business entity matters when it comes to tax obligations and liability in case of a lawsuit. A sole proprietorship means the owner is it when it comes to liability and tax obligations. Nobody else is responsible.
The best thing to do is to incorporate.
Setting off the Business Credit Reporting Process
Start at the D&B web site and get a totally free D-U-N-S number. A D-U-N-S number is how D&B gets a business into their system, to produce a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.
Once in D&B’s system, search Equifax and Experian’s sites for the small business. You can do this at www.creditsuite.com/reports. If there is a record with them, check it for correctness and completeness. If there are no records with them, go to the next step in the process.
In this way, Experian and Equifax have something to report on.
Starter Vendor Credit
First you ought to build tradelines that report. Then you’ll have an established credit profile, and you’ll get a business credit score.
And with an established business credit profile and score you can begin to get credit for numerous purposes, and from all sorts of places.
These kinds of accounts often tend to be for things bought all the time, like marketing materials, shipping boxes, outdoor work wear, ink and toner, and office furniture.
But first off, what is trade credit? These trade lines are credit issuers who give you starter credit when you have none now. Terms are commonly Net 30, rather than revolving.
Hence, if you get approval for $1,000 in vendor credit and use all of it, you need to pay that money back in a set term, such as within 30 days on a Net 30 account.
Vendor Credit – It Helps
To start your business credit profile the proper way, you ought to get approval for vendor accounts that report to the business credit reporting agencies. When that’s done, you can then use the credit.
Then pay back what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.
Here are some stellar choices from us: https://www.creditsuite.com/blog/5-vendor-accounts-that-build-your-business-credit/
Accounts That Don’t Report
Non-reporting trade accounts can also be helpful. While you do want trade accounts to report to at least one of the CRAs, a trade account which does not report can still be of some worth.
You can always ask non-reporting accounts for trade references. Additionally, credit accounts of any sort ought to help you to better even out business expenditures, consequently making budgeting simpler.
Monitor Your Business Credit
Know what is happening with your credit. Make sure it is being reported and fix any errors ASAP. Get in the practice of checking credit reports. Dig into the particulars, not just the scores.
We can help you monitor business credit at Experian, Equifax, and D&B for 90% less than it would cost you at the CRAs.
Takeaways for Business Funding Sources and Building Business Credit
Always use credit sensibly! Don’t borrow more than what you can pay back. Track balances and deadlines for repayments. Paying off promptly and in full does more to raise business credit scores than just about anything else.
Establishing business credit pays off. Good business credit scores help a small business get loans. Your lender knows the business can pay its debts. They know the company is bona fide.
The company’s EIN links to high scores and lenders won’t feel the need to ask for a personal guarantee.
Business credit is an asset which can help your business for many years to come. Learn more here and get started toward growing company credit.
Business Funding Sources, On Balance
Every company owner needs business funding. But there are a number of options out there. Go get yours.