While the process of using private credit to get business credit sounds like a very mysterious and difficult process for the average person, the truth is that it is no different from building your personal credit profile. The only difference is that you build credit in the name of the company. In this article, we are going to show you how to get business credit so you can go on managing your business.
It all starts with you incorporating your business. This is done so that your business becomes a separate entity from you. Register your business and make sure it becomes a corporation or a Limited Liability Company. It's no use maintaining your business as a sole proprietorship because, in that case, the business becomes your personal property, not its own entity.
Once your business is incorporated, go ahead and get an Employee Identification Number from the IRS. It's a lot like a social security number, only that it's for business. Next, get a DUNS number. What is DUNS number? It is the business credit profile number assigned to company.
Once you have both EIN and DUNS number, open a checking account and a savings account in the name of the company. Once this is done, apply for credit from different vendors and get yourself billed. When you apply for a phone line for your business, for example, make sure that it is in the name of the company. Remember that you are building a credit profile for your business and the only way to do it is to pay bills on time and to make sure that those bills are paid in the name of the company. Aside from the telephone bill, you could also apply for vendor credit from your local office supply store.
Once you have some bills to pay, it's time to get a bank loan. You should have some money in your savings account because it will convince your bank that you are credit-worthy. Once the loan is granted to you, pay it on time.
As you can see from above, the process of building business credit is really similar to building a personal credit profile. The only difference is that you are doing things in the name of the company.But here comes the question, why do you need business credit? Well, you need it because you cannot rely on using cash only for your business operations.