.If you want to borrow money when you need it — without you needing to guarantee the loans personally — you need to build your business credit. It is important that you are taking steps to build your business credit profile.
According to Dun and Bradstreet , below are ways you can start building your business credit profile even before you open your business:
- Establish your business as a separate entity to separate your business credit profile from your personal credit profile, such as corporation or limited liability company
- Establish a viable business on paper, including having a written business plan and all the necessary licenses and permits needed for the business
- Do a credit assessment and find out exactly the requirements for both lenders and credit bureaus to know what standards are expected.
- Start making purchases for your business from vendors who will let you establish credit based on your personal credit background and report your transactions to the credit bureaus
- Entice vendors to give you a line of credit, and one way is to have your business backed by investors as it sends a signal that there are people who are confident about the prospects of the business
- Get loans from state or national business associations, such as the Small Business Administration, and pay these loans back on time.
- Pay within the set terms of suppliers
- Make sure to work with suppliers who are reporting your prompt payments
- Try to limit the number of inquiries regarding your credit profile
- Do not overdo it with business credit cards — have a couple, not a dozen
- Do not let licenses or registrations lapse — make sure you’re on top of renewals or obtain any new licensing that you’re expected to have for your business operations
- Maintain thorough, up-to-date financial records
Something fairly common among the micro businesses and home-based businesses, the article “Building Business Credit” warns small business owners not to:
Don’t try to get business credit as a substitute for bad personal credit. If you have damaged personal credit, work on rebuilding it while you’re building business credit.