Posts Tagged ‘Business Credit’
How to Get Good Business Credit Fast
Business credit is separate from your personal credit. You can build good credit as a business owner and use that credit to help grow your business.
As your business continues to grow and becomes more successful, your business credit will become stronger and may even surpass your personal credit. Establish your business credit and ensure that you build up a good credit history for yourself as a business owner.
1. Understand the difference between a good business credit score and a good personal credit score. As you build your business credit, you’ll want to have an understanding of this rating system. With personal credit scores, a score of 680 or higher is exceptional, and the range can go from 300 to 850.
With business credit scores, on the other hand, a score of 75 or higher is exceptional, and the range goes from 0 to 100. Note that business credit scores start at 0 because not all people have established business credit.
2. Operate your business under an LLC or corporation, rather than as sole proprietorship, partnership or independent contractor. This will separate your personal credit from your business credit and helps to protect your personal assets.
3. Apply for business credit, leases and loans through your business. This means getting another company to grant you credit through your business without using your personal information and then reporting to the credit agencies.
4. Make sure your business is set up properly. To gain credibility and start building good business credit, you need to ensure your company is operating as a reputable business.
This means getting any required licenses and permits, having a valid business address and phone number and adhering to any other state or federal laws that pertain to your business or industry.
5. Pay back your business debts on time and make monthly payments. Be careful not to borrow more than you can realistically pay back. Just like building your personal credit, to build your business credit you need to be a responsible borrower. Also, making monthly payments, rather than quarterly for example, will keep your credit profile active. Read the rest of this entry »
How to Apply for Business Credit
Small business presents special challenges to start up and maintain. It often takes a small business three to five years to generate a profit. Small businesses often stay in business during that time through loans and various types of business credit.
1. Compose a strong business plan. This document outlines your business in detail, how it will function and succeed and what resources you’ll need to maintain the business for the next five years. There are business plan professionals and software that can guide you through this process.
2. Detail which areas of your business need financial aid. You can take a general business loans or arrange financing for specific needs, such as equipment, insurance, overhead costs and rent. You may have a better chance getting one of these, as the competition will be smaller.
3. Talk to your vendors. Vendors and individual companies often offer credit accounts for their clients and may be willing to negotiate prices if you ask.
4. Consider leveraging if you’re buying a small business with inventory. Some lenders will arrange financing with the inventory, receivables and equipment as collaterol.
5. Apply for a business credit card. Every major credit card company offers business cards that are structured differently than personal cards. They have higher limits, lower interest rates and often offer other protections that can keep your business on track.