Having a strong credit rating is one of the most important parts of a person’s financial life. Good credit, as it is often referred to, allows you to purchase a car, home, and gives you favorable interest rates when it comes to borrowing. In short, good credit allows you to live a more abundant life, filled with conveniences you might not otherwise enjoy. Good credit tells lenders that you can be trusted and as a result, a wide range of financial doors are open to you that might be closed for others. But here’s a point to remember — good credit doesn’t just happen. It takes work to establish and maintain good credit, but when used properly, it can make life so much easier. The same things can be said for business credit, but in so many cases, entrepreneurs miss out on establishing this key part of their business model.
If you’re thinking about establishing business credit, The Coley Group provides these 6 things you must understand.
Establish Your Business
Saying you have a business is one thing – establishing your business is something totally different and that’s what you’ll need to do in order to get your business credit journey started. Register your name, address, and contact number. Also, open an account for your business wherever you bank and regularly pay bills using this account.
Build Relationships with Vendors
The next step in your business credit-building journey is to establish relationships with vendors who regularly report to business credit bureaus. Dun and Bradstreet, Experian, and Equifax are considered industry leaders, and all keep histories of business debt payments. Before you enter into a credit relationship with any vendor, be sure they report your efforts. That way your rating can gain traction and most importantly, grow.
Timely Payments
It might seem like a simple thing to do, but simple or not it warrants mentioning. Paying your bills in a timely manner is perhaps the most important part of the business credit-building equation. Once you’ve established your business credit, protect, and cultivate it by making your payments when they’re due.
EIN Number
An EIN (Employee Identification Number) is an essential part of your business, especially when it comes to the reporting of your taxes. In order to get one, your business must be structured properly. One last thing about EIN’s. You need to have one before you can open a bank account under your business name so by all means, make this a priority.
Structuring Your Business
We spoke about establishing your business, but you must also structure your business. Ideally, you would want to do structure it as an LLC or a corporation. Structuring your business this way as opposed to a sole proprietorship allows you to build business credit outside of your personal credit. Also, when you choose to structure your business as a sole proprietor, you also place your hard-earned personal assets at risk in the event any type of legal action related to your business arises.
Continue to Monitor and Grow Your Business Credit
Building business credit is an essential part of your long-term success. Once you’ve done the hard work and laid a foundation, be sure to monitor and strategically grow your credit profile. Take the time to research potential partners and vendors and use them wisely. Monitoring your credit will put you in a position where you receive favorable interest rates and the kind of perks, you’ll need to continue growing your business.
Trust The Business Plan Writers at The Coley Group to Help Your Business Grow
The credit journey is an important one and one that is a key component of business plans developed by The Coley Group. Our team of strategic, MBA business plan writers understands how to weave your plans to build credit into a powerful narrative that shows lenders and investors you’re worth the risk. For more information on how we can assist you in the areas of business planning and establishing business credit, please contact us today for a free quote.
