How Do Startups Establish Good Business Credit?

As a startup business, you’re probably wondering how to establish good credit for your business when you don’t have a long history. It’s almost a vicious cycle. You need good business credit to grow your business, but you can’t get money to grow your business without credit. What’s a startup small business owner to do? There are steps that you can take.

First, register yourself as a business entity and get a business number. Sole proprietorships will not be able to apply for credit cards or loans. Make sure that you keep your business and personal finances separated to fully establish your business. Have your own business bank account that you run all of your business income and expenses through. Get registered with the Better Business Bureau in your area to establish legitimacy.

Start with small accounts or credit lines with local vendors or suppliers. Keep a list of those vendors for references as you grow. Make sure to pay off all accounts on time. The larger companies will report your payments to the business credit service, which will increase your credit score, but having references when you approach the bank for a credit line will help your case.

Be careful about stretching yourself too thin and not being able to make on-time payments. The business credit score is measured by your timeliness. Making payments ahead of the due date also increases your score. You should also avoid opening too many accounts at once.

Open a limited credit line at your bank or credit union. Talk to a customer service representative who works with small businesses to see what options you have. Again, make sure that you pay it off religiously on time. Although you do not want to mix personal and business finances too often, you may be able to use your personal credit to help you establish a business line of credit more quickly.

Make sure that you always pay your business taxes on time. This will cause you more problems than you can possibly even imagine. You will pay large fines and have credit issues that will chase you for a long time. You have to make your taxes a priority.

Credit is available through local vendors and suppliers when you are first starting out. Don’t forget to check your business credit score, just as you do your personal score. You can catch errors and make corrections quickly which protects your score. If you are seeing it change, find out why and change your habits. Make your business finances a priority and you will see your credit score grow.

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