Establishing a business credit and keeping it in excellent standing is important for any business. Even if you've started as a home based business or a small business, surely you have plans of making it bigger in the industry. Sooner or later, when your business gains experience in the market and your client base grows, you'll be planning on the expansion of your business. With this in mind, having an excellent business credit to back you up would definitely be an advantage.
Perhaps you may have acquired business loans or business credit cards using your personal credit history. But once the business has been started, you should make the move to establish a separate credit history for your company. Why is this important? A business credit gives your company a more credible standing in the eyes of lenders, investors, suppliers, and other businesses that you'll be dealing with.
How do you establish business credit?
First, you need to set your business identity. This is done by registering your business as a corporation or an LLC (Limited Liability Corporation). You'll also need to secure all business licenses required by your local state. Having a physical company address is another major requirement in order to be recognized as a legitimate business.
The next step would be to register with a legitimate business credit reporting agency. In the US, most businesses are registered with Dun & Bradstreet. You can fill out their online application and wait for the process to complete within 30 days. To be approved, you'll need to provide basic details as well as financial information about your business.
Business Credit Cards for Building Credit
After receiving your D&B number, you're ready to build up your business credit history. A great tool for building credit history is a business credit card. You can use a business credit card as support to your cash flow. Credit cards can be used for purchasing stocks, buying equipment, seeking repairs and maintenance services with the option to pay for them at a later time.
The important thing to remember is to stay within your credit limit and to submit your credit card payments on time. Remember that delays on your payment can badly affect your credit history while consistent, timely payment raises your business credit rating or Paydex score.
As much as possible, pay off your balances in full each month to avoid incurring the interest rates and late penalty charges. Although a minimum payment is accepted and most business credit cards offer a very low minimum due, it isn't recommended. Keep in mind that the longer you put off your payments, the higher the cost of your debts would be.
Business owners are also advised to check their credit reports regularly. Obtain a copy of your business credit report from D&B and carefully examine if all information in your report are correct and accurate. If there are errors, you should immediately contact the credit bureau who issued your report so that the necessary corrections can be made right away.
About the Author:
Pamela Williams is a Loan Consultant, Internet Marketer, Writer and owner of BusinessCreditCardSite.com, a finance company in Las Vegas, Nevada that provides support for businesses all across the US particularly with obtaining credit cards for business. Visit
http://www.businesscreditcardsite.com
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292
Date Published :
Jun 19 2009