Developing a credit record for your business that is separate from your personal credit record is important as your business grows. It can lead to lower rates on loans and leases as well as protect your personal credit record. The Better Business Bureau offers these tips to establishing business credit.
Establish a consistent identity. Use the same business name, address and phone number so that credit-reporting agencies can more easily compile records. You might also consider incorporating to further separate your business from your personal identity.
Open separate accounts for your business. Open an account with a supplier that reports transactions to business credit-reporting agencies. When you make small purchases and pay them immediately, you’ll get extra credit for paying them before the due date.
Prepare key documents. Lenders generally ask for your business’ tax records and earnings statements and may also ask for your business plan. Your accounting professional can help you prepare statements in the format lenders want to receive as well as walk you through questions the lenders may ask and how to respond.
Apply for a DUNS number. Dun & Bradstreet is one of the major business credit reporting agencies. The process normally takes 30 days but you can pay extra for an expedited account. Once you have the account, make sure the companies you work with are reporting information about your on-time payments. You might also want to establish trade accounts with a few other businesses that report to credit agencies and be sure to pay those bills early. You can also provide extra information about your businesses for your credit file.
Check your business’ credit score. A PAYDEX score is similar to your individual credit score and takes information from your Dun & Bradstreet credit report to establish a number. Lenders can also get a comprehensive D&B report. The personal credit reporting agency Experian also maintains business credit reports.
Expand the credit profile. Once your business has started a solid business credit report and score, apply for a business credit card or apply for a small business loan. You’ll help your business credit record by making payments or paying off the amount before the due date.
For additional ideas for managing credit, download the Better Business Bureau’s guide at www.bbb.org/credit-management.
If you have recently started a new company or are considering launching a venture, then contact us now! For additional information, please contact Chris Roush, CPA, at 330.674.6055, or click here to email Chris. In a brief consultation he can provide you with detailed information on key steps to take when launching a new enterprise!