Keeping your business credit under control is insanely easy. Here’s what you do.
Yup. I said it. Getting and keeping your business credit in pristine condition is easy. Business credit is one of the few things that you have near absolute control over.
As with personal credit, you never bite off more than you can chew. Don’t rack up thousands in debt if you are only bringing in a quarter of that. And of course, cut all spending, including debt, when income is reduced. All obvious stuff, right.
Well, there’s more to keeping your credit in check than that. Guess what? It’s still easy to do. How easy, you ask? Continue reading.
- Do you have business credit at all?
Most of us starting businesses for the first time won’t have business credit. Then there are those of us who have owned businesses before who are unsure.
Luckily, there’s an easy way to find out. Check with Dun and Bradstreet to find out where you stand with your company’s credit. Register your small business with Dun and Bradstreet’s iUpdate online, [ http://iupdate.dnb.com/iUpdate/mainlaunchpage.htm] or call their Customer Service line at 1-800-785-0430.
If there’s no credit info available or you know for certain that your business has no credit, you can apply for a DUNS number by visiting the same link above, and scrolling down to the blue “Get a D-U-N-S number” button near the bottom of the web page.
I’m sure your goal is to see longevity with your small business, so you will definitely want to register with Dun and Bradstreet to get the ball rolling on your business credit. This stuff is important, and banks as well as other companies will be looking at this info in the same way that your banks and credit card companies look at your FICO score.
One more thing: Consider establishing a credit file with other credit bureaus like Equifax and Experian. Multiple credit files are better than one.
- Get Incorporated
In order for your business to stand independently from you, and hence, your credit, you will need to give your company it’s own identity. You don’t necessarily need to run a C-corp in order to do this. Just apply to for an LLC and you’re ready for the next step.
- Apply for an EIN number
Just like you have a social security number, your business can have something similar in an EIN number. This gives your company federal acknowledgment. When you apply for an EIN number, you are expected to pay taxes yearly using that number. This number is also important when opening bank accounts and other official business.
- Establish some business credit history already!
Now that the business world knows that your small business has a credit background, it’s time to build some credit. Again, this is relatively easy.
Open up at least one bank account with your company’s information and EIN number. Then apply for a business line of credit. You’ll definitely need a solid business plan or track record for this to work in your favor.
Just a side note: Don’t go overboard with trying to apply for credit with multiple sources in a short period of time. Multiple short term inquiries to your credit can be damaging.
Keep your bills paid
This objective should be easy, considering you have a decent budget in place for your business, or you are making reasonable income from your products and/or services.
When you use your line of credit or credit cards linked to your business account, make sure the balance is paid in a timely manner. Avoid maxing out your credit limit. Prevent defaults on any financial obligations, including something as small as a telephone bill.
Treat you business credit like you would treat your personal credit if you want it to look attractive.
Didn’t I tell you it was easy? As simple as cultivating a good credit file can be, it is one of the most important and overlooked aspects of starting and growing a business.
Having good business credit will allow your company to receive better terms on loans, should you need them. This alone can save you some serious money when your interest rates are lower than average. If you apply for loans with excellent business credit, you won’t have to personally guarantee that you will pay your debt back to the bank. Suppliers will take you more seriously and will give your company favorable terms. Some will ship products before you make payments if they know that your credit is solid.
Many budding entrepreneurs make the huge mistake of building their companies on their personal credit. Don’t do it. Keep your personal credit far away from your business endeavors.