Many small business owners have the tendency of using their personal credit for their own business. This is attributed to the fact that many lenders and suppliers will obviously evaluate your credit history every time the business applies for a small business loan or another type of credit. Therefore, as a small business owner, it is essential to split the business from you and treat it as a separate entity.
First get Federal Tax ID and pick the entity structure of your business. The company’s ID number will be used to register with the business credit reporting agencies such as Dun & Bradstreet. Setting up a business credit report for your business has different advantages such as getting low interest rates on loans and placing your business to get encouraging payment terms through suppliers.
Remember the higher the business credit score, the higher the probabilities to qualify for better payment terms from the suppliers. Below is a look at approaches to get business funding and improve your business credit rating.
- Registered With Credit Agencies
One of the primary steps is to apply for a DUNS number. After doing so, continue to build a business credit profile which is isolated from your personal credit report by getting credit from suppliers and providers.
- Avoid Late Payments
One thing that impacts business credit is late payments. So as to increase your credit rating, it is always advisable to pay all your lenders and suppliers timely without failure. It is also good to check out that your business credit report will reveal that your business will pay better than terms.
- Pick A Reliable Supplier
This is also another essential area of concern you must take note of in relation to your choice of supplier. Many small businesses suffer from incomplete credit reports considering the fact that many lenders or providers do not report the payments made to the credit agencies. For that reason, if you understand your business makes all the payments on time, it is recommended to force them to report all the payments to different business credit agencies. This is because of the fact that many suppliers do not file payments made to them by businesses. Consequently, choose a provider or lender who reviews all of the payments you’re making to them with a purpose to boost your business credit rating.
- Avoid Using Too Much Credit
After your small business is well established and cannot rely on borrowing, it is right to make investments back into the business as opposed to getting small business loans on credit. Alternatively, it is good not to use all of the credit given to you by the lenders. This referred to as credit utilization ratio. The less the credit score you use out of the total credit given to you, the better your credit score becomes. Using less credit reveals that your small business is financially strong and doesn’t depend on credit.
- Split Your Personal And Business Credit History
Last but not the least, we would highly recommend that you split your personal credit from business credit in every phase of your business operation. This is because of the fact that running them differently will minimize events one could have on another. For instance, if you are experiencing a financial hardship, it should not intrude with your business credit report. Follow these five verified methods to start the building business credit.