If you recently started a business then you won't have any credit established in the company's business name. The bulk of your business was built upon your personal credit score and savings. To create a professional business without using your funds this article will provide you tips to show you how to build business credit for new owners like you.
The first order of business is to make sure that you have all of your legal documents completed and set up. You will need a tax identification number, business license, physical address, telephone and fax number, business checking account and business plan. You may already have these items. But these are essential to getting business credit.
The next item you will need is a trade reference. At least five trade references are needed to build your business credit. These trade references will report how well you pay your bills to the major business credit reporting agency named Dun and Bradstreet. You can apply for credit cards for items that your company will need. Office supplies, gas cards, cell phone accounts, retail supplies and vehicle loans are some of the items that might be needed. Most small business owners might start out with secured credit cards, but can eventually transition to unsecured financing.
In personal credit ratings your FICO score determines what type of loans and interest rates you can attain. In business credit it is called a Paydex score. This score has a range between zero and one hundred. A score between 90 and 100 is deemed as excellent. A score between 75 and 89 is considered good. And scores from 70 and under are considered bad. You will need to protect your business credit score just as you would your own personal credit rating. It will make or break your business. These scores are determined and calculated by Dun and Bradstreet. How well you pay your bills on time is also a deciding factor. If you don't pay on time your Paydex score will suffer.
Business credit is needed by new owners as well as existing ones. It provides additional lines of cash to help provide working capital for equipment, inventory, or payroll. You will want to get all of your legal documents completed before attempting to start the process. After getting everything done you will need to acquire five trade references and a bank reference to report how often you pay your bills to raise your Paydex score. As your credit improves you will be able to get higher loan amounts as your business grows. One thing to remember is to not take on any loans or credit that cannot be repaid. It will take a long time to correct and repair and will negatively impact your business.
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