Paul Shread posted an article on the Time Magazine online edition a few days ago. It was very informative and could be beneficial in helping you build good credit for your small business. In today’s environment, it is so important to have good credit … actually, you don’t have another choice...you MUST have good credit to start a business or to get any extra financing you may need for your existing business.
Note the following quotes from Mr. Shread, which he adapted from 5 Tips for Building Good Business Credit by Pedro Hernandez at Small Business Computing.
“At some point you may need to borrow money to fund your growth. When that day comes, you’ll want to make sure that your business has a good credit rating.To shore up your business credit rating, start by separating your personal and business finances. Stop putting business expenses on your personal credit card, and stop paying for equipment and supplies out of your personal accounts. If you must put more money into your business, make it an official loan with legal paperwork.”
The article also suggests that you register your business as a separate legal entity, as banks typically require a tax or employer identification number from the IRS before allowing you to open any type of business account or line of credit.
“Next, apply and get approved for a small business credit card or loan, and start small if you can. A history of modest debts paid off on time is an ideal start toward a bigger loan at a favorable rate.” Following this advice and doing business with suppliers who can report your payment history to business credit-rating agencies will help you establish the good credit score you need for the future of your company.
“Finally, be sure to monitor your business credit score. A business credit monitoring service like Experian or Equifax will tell you if you’re on the right track.”