It takes money to start a new business and keep it running. If all goes well, you might even want to expand in the future. Sometimes, the capital you need has to come from a source other than the cash you have on hand. You can increase your odds of success by obtaining and keeping a good business credit rating. Approximately 70% of all business owners use credit when making purchases for their business.
Some Simple Steps
The first thing you need to do after you’ve picked a business name and written your business plan is to incorporate. You could form what is called a Sole Proprietorship, but this means that you are the only owner and you will shoulder all of the responsibility if something goes wrong. It does not protect your personal assets if, unfortunately, you were to be sued by someone with which you’ve done business.
When you form a Limited Liability Company, or LLC, the government views your business separately from your own personal credit, accounts, and assets. This step also ensures that you will be protected, as an individual, if your business encounters any liability issues through purchases you’ve made or lawsuits brought against your business by a person or corporation.
The next thing to get is a Federal Tax Identification Number. This is easy to do online and there is no cost to get your Tax ID. It will be used, along with your business registration, to apply for credit. After that, opening a business bank account not only helps you establish a good business credit rating, but it also helps to further separate your personal life and assets from your business. When you apply for credit, you do so in your company’s name instead of your own.
Once you’re in business, be sure to make all of your payments on time. If you’ve used credit to buy supplies or equipment for your business, be sure to adhere to the agreements you’ve made in order to build your credit rating.
Stay Diligent and Know Your Score
Suppliers and other kinds of creditors can use business credit reporting to influence their decision whether or not to extend credit to your company. Keep an eye on your credit rating. This will make it easier to catch any misinformation that your credit report might contain and it keeps you informed of how you’re doing in terms of raising your credit score. Being diligent about your credit is just as important as monitoring cash flow and the quality of service you provide to your customers. Better scores can raise your credit limit and lower interest rates as you build your business, ensuring that you will continue to increase profits and reach higher levels of success.