Many business owners don’t realize that business credit is a factor until they try to apply for a business loan or credit card. Fortunately, there’s a way for business owners to establish and build business credit and it’s fairly easy.
Step One: Pull Current Reports
Even if they’re terrible, you have to look at them. Pull both your personal and business credit reports. Financing companies will often look at your personal credit score and report. In addition to your business credit report to see if you’re qualified for the loan/credit card.
Step Two: Incorporate Your Business
Make your business official by setting up a legal entity that separates your personal life and finances from the business. Incorporating your business provides several financial benefits but it also provides liability protection and helps protect your intellectual property.
Step Three: Obtain an EIN
After you make your business official, you can apply with the IRS for an Employer Identification Number (EIN) which allows you to file tax returns, open business accounts, and apply for credit cards.
Step Four: Open a Business Checking Account
In addition to a checking account, you may want to consider opening a safety deposit box for important documents and valuables as well as a savings account in case of taxes and unexpected expenses.
Step Five: Establish Credit Lines
Apply for small business credit cards and have your vendors report your payments, paid by your business, to the credit agencies.
Step Six: Apply for a D-U-N-S Number
If you plan to bid for federal contracts or apply for federal grants, it would be best to have a Dun & Bradstreet number, D-U-N-S number: a nine-digit number linked to a business via and per their location. For example, if your business has two storefront locations, each one would have a separate D-U-N-S number.
Much of repairing and establishing good business credit follows the same path of establishing and maintaining your personal credit: pay on time, if not early, watch your utilization and manage your money well. Contact WCK Financial today.