A Simple Guide to Business Credit
Getting your own business up and running involves a bit of money in the early stages, and investors must be convinced that your operation is a worthwhile opportunity before they hand over the bundles of cash. With only a minority of small businesses being approved for a loan from financial institutions and other misc. lenders, you should still find other ways to get the money you need to get things going. Personal credit history is what trumps up the majority of entrepreneurs who want to create something for better, but never let that keep you from going forward with your dreams. Even though lenders have a plethora of resources at their disposal to look into your past, you should still go ahead with it so that you know what they know about you.
On a brighter side of things, a poor credit history should be just the thing that motivates you to make you and your business a success, but keep in mind that it’s going to take a financial lifestyle change to curb your frivolous spending habits. Keep in mind that now is always a good time to establish a solid business credit history no matter what industry you’re in.
Here are some tips and tricks to get where you need to go…
It’s a smart move to separate your personal credit history from your business so that nothing finicky happens down the road. By incorporating your business or registering as a limited liability company, it avoids any legal issues regarding your own individual debts from your company’s.
Always remember to:
- Register with the IRS to get your own EIN (Employer Identification Number)
- Register with Dun & Bradstreet to create your own business credit number
- Set up a business address
- Set up a business phone
- Set up a business bank account
- Create a business plan
- Get whatever business licenses for your region
- Keep flawless records
The folks that have the money are looking to see if you’re up to par with standards, and that you maintain consistency.
Get your personal credit history in check
Even though you’ve separated yourself from your business, it won’t keep a savvy person from scoping out your flaws, especially if you’re trying to get that big loan. You have to pay attention to your credit score like a night owl wearing night vision goggles, and that way you don’t have to pay high interest rates in the future. Keep in mind that the majority of financial institutions won’t even think twice about you if your credit score is well below 700. Yep, this even includes the Small Business Administration.
You’re going to have to get used to checking your personal credit report every three months or so and fight any discrepancies. Your credit history is seen as something that reflects your ability to honor past debts, but keep in mind that it factors heavily on your overall score, how long you’ve had credit and how many people have looked at it.
If you’re working with a partner, see if he or she can apply for the loan. Some financial institutions, though, will still look into all the partners past who are members of the round table.
Keep building business credit
This is probably the best way to bring in much-needed money when you want to outfit your office with the latest gadgets, or if you want to work with flexible payment terms with suppliers. After you’ve worked out a couple of deals, make sure you pay them back before of the due date or at least on time, giving them a reason to keep on doing business with you.
If your company works in the cloud, take a look at PayPal, since they don’t check your personal credit history, and they even have friendlier rates instead of other costly merchant providers.
Once you’ve gotten the hang of things, you should shop around for lenders in your neck of the woods who might take a chance with you. Even if you’re still turned down, you know the loan process by heart and over time, as you maintain credibility, your odds of getting that loan in the future greatly increases.