One of the most important first steps you can take for your new business is establishing a good line of business credit. This is vital in the early stages but continue to be important throughout the life of your company. Here are a few helpful tips for establishing and maintaining good business credit.
Forming a corporation or LLC will be the cornerstone of establishing your company's solid credit. It has become extremely difficult for sole proprietors to establish business credit separate from their personal credit. By simply creating this separate legal entity, you will lay the groundwork for building your business credit.
In most cases, the next step is obtaining a Federal Employer Identification Number or Tax ID Number (or EIN) for your newly-formed corporation or LLC. The Tax ID number is essentially the business world's equivalent of an individual’s Social Security Number. Tax ID Numbers are most often used for banking, hiring employees and paying taxes. When you obtaining an EIN, you help separate your personal credit history from your business credit history.
Another key element as a business credit builder is acquiring one or more credit cards for the business. Utililizing business credit cards is a necessity for obvious reasons, and most major credit cards report to all three credit bureaus, TransUnion, Experian and Equifax. This reporting is essential in order to strengthen your company's credit history. Of course, you should pay your bills on time, since not only good payment history but also bad payment history is reported to the credit bureaus. The better your payment history, the better your overall business credit becomes.
It may take some time to establish your business credit, but you will see a significant difference in the long run. Try some of these business credit builders; establishing good credit will open doors and opportunities for your business.
THE AUTHOR OF THIS BLOG ARTICLE IS NOT A LAWYER AND HARVARD BUSINESS SERVICES, INC. IS NOT A LAW FIRM. THE ARTICLE ABOVE IS NOT INTENDED AS LEGAL ADVICE AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. THIS SHORT ARTICLE IS STRICTLY TO MENTION SOME ASPECTS OF DELAWARE’S CORPORATION LAWS AND/OR LAWS RELATING TO OTHER FORMS OF ENTITIES WHICH YOU MAY NOT BE FAMILIAR WITH. WE RECOMMEND THAT YOU CONSULT WITH A LAWYER BEFORE FORMULATING A STRATEGY WHICH WILL BE SUITABLE FOR YOUR SPECIFIC CASE.