Every individual should want to achieve a good personal credit score so that he/she can be approved for a loan, set up utility accounts, make major purchases, and for other reasons. Likewise, it is critical for every business owner to establish and build business credit.
Why is it Important to Build Business Credit?
A business credit score will be used by many organizations involved in your business dealings including lenders, insurance companies, suppliers, and other business partners. It is important to build business credit to achieve a strong score which helps in getting essential funding for a business to operate efficiently and to grow. It can help get better trade terms with suppliers, reduce or eliminate occasions requiring pre-payment, and it can be very helpful in a financial emergency. Moreover, it helps establish a business as trustworthy.
How to Establish and Build Business Credit
Here are some useful tips to establish and build business credit:
Create the right legal entity for your business to separate it from your personal finances. Then register the business and obtain a Federal Tax ID Number (EIN).
Prepare a formal business plan. That will be essential in getting financing and in developing relationships with banks, lenders, suppliers, and other entities.
Open a business bank account, use it regularly to pay bills, and nurture important banking relationships.
Establish credit with suppliers and vendors and make sure they report to credit reporting agencies.
Get a business credit card and manage your debt by keeping your debt ratio below 30 percent of the credit limit. Then, after achieving a consistent payment history, request a credit increase to reduce your debt-to-credit ratio.
Be sure to pay all bills on time.
Always keep business and personal transactions and expenses separate.
Continually monitor your business credit to ensure the data is correct and your credit scores are showing growth.
Seek Expert Financing Assistance
Contact Hornet Capital Solutions, based in Lacey, WA for more financing options than any single bank in the USA can offer.