Simple Steps to Good Business Credit

Establishing good credit for your business may be one of the most important issues facing any new entrepreneur. There are some similarities to building personal credit and some very crucial differences. Hopefully, we can offer some general tips to make the process less burdensome and better understood.

Don’t Procrastinate – Incorporate! – As a sole proprietor it will be difficult to establish business credit separate from your personal credit. This facilitates the need for establishing an LLC or a Corporation. The creation of the separate legal business entity will lay the basic foundation for obtaining separate identifying factors to help build the business credit. Many sole proprietors waste valuable time which could be used to create a positive credit background by avoiding incorporation. Harvard Business Services, Inc. can help to create the LLC or Corp. quickly, affordably and efficiently.

Identify Your Business! – Simply put – this means that most new corporate entities will take the first step toward good credit by obtaining a separate EIN or Tax ID Number for the business itself. In essence this procedure will create a taxpayer identification number for the new entity – much like a social security number is utilized for an individual. This will help to set the business apart from any negative personal credit history and create a boundary between the two. The process is quite simple and can be achieved also with Harvard Business Services, Inc. – or can be obtained independently from the IRS.

Gotta Keep’em Separated – not only is this a popular song lyric but it also applies a solid rule to good business credit – keep business and personal credit separate. This is initiated by obtaining an EIN for the company and is maintained by opening and keeping separate bank and credit accounts for the business and the individual. There is risk associated with mixing the two and can create liability issues toward personal assets if left comingled. It may take at least two years for the business account to be offered enhanced credit opportunities.  After that period, typically, the personal history is not considered and the business can step forward on it’s own with fresh clean credit.

Obtain a Business Credit Card – This will get an initial credit report started. It will be very beneficial if one is obtained that reports to all three major credit bureaus. It is also a good idea to establish more than one card to strengthen the credit history. Many business owners will usually use more than one business credit card.

Pay Your Bills On Time – This may be obvious, however, this is where many businesses fail through over extension or a poor payment approach to their respective debts. Typically, by paying vendors and creditors on time – the credit opportunities will be enhanced. Most creditors and vendors will report to the credit bureaus and a good history of payment will lead to a good level of credit. Also, be careful not to over extend by opening too many credit accounts.

Building good personal credit will make your personal finances much easier and the same can be assumed for building good business credit as well. It may take a while to establish – but once the initial steps are behind you the opportunities will become very real! Harvard Business Services, Inc. can help you to take that first step toward good business credit!