How to Establish Business Credit for the First Time

Getting business credit might seem like an impossible task if you’ve never applied for funding in the past. Admittedly, it is a lot harder for small business owners or new businesses looking for first time business loans. This is because banks prefer businesses with perfect qualifications. These qualifications are normally based on how long the business has been running, a strong credit score or steady annual revenue.

The simple fact is that small or new businesses are just a lot riskier to lend to. This is due to the fact that 8 out of ten businesses fail within the first 18 months. Saying that, it’s not impossible to get Business Credit. You just have to work a little bit harder to prove that you are responsible enough to have a successful business.

Establish a Business Entity

When you start your business, there are many decisions that you need to make. One of the most important ones being that you need to establish a business entity. Forming a business entity is an important way to protect yourself from liability and save money on taxes. You need to decide on the type of legal structure you have for your company. If you’re concerned with establishing business credit then you’ll need to decide if you’ll be a C Corporation, S Corporation or a Limited Liability Company (LLC).

This is not a decision that can be made lightly, so it would probably be a good idea for you to speak to a business expert to help you decide. This decision will affect a huge part of your business, it will have an impact on how much you have to pay in taxes. Not only that though, it will affect the amount of paperwork you need to do, the personal liability you face and your ability to raise money (to get a loan/business credit).

Open a Business Bank Account

This is another important step, as you’ll need to make sure that you keep your business and personal finances separate. You’ll want to make sure that you draw a line between your business and personal expenses. This is so that business credit bureaus can see how much money is being put into your business (and also how much money is being taken out), this will be used to calculate your business credit score.

Having a business bank account will really help you establish business credit. It will also help you in the future, as banks or lenders look for business bank accounts that have been established for at least a couple of years. Those first couple of years will go by really quickly, so it’s important to set up your business bank account as soon as you can. This way you know that you’ve done everything you can to help get business credit.

Get a Business Credit Card or Line of Credit

One of the easiest ways to help fund your business is to get a business credit card or line of credit. If your business is brand new, then you might struggle to get a business loan. Don’t be disheartened though as you can always go to a Business Credit Workshop to help you learn more about what you have to do next.

You can always apply for a business credit card to help you cover day-to-day purchases for your business. You don’t want to buy things for your business on your personal account as this won’t help your business credit. Instead, if you pay for business things on your business credit card, then this will help you establish business credit.

By borrowing and repaying money on time (or early if possible), can really help to establish your business credit. As a start-up company you will probably be thinking that things are tough and to be honest, it probably is tough. But if you stick by it and keep on pushing, then hopefully your business will be successful. Don’t forget though, that even with a brilliant idea and strong work ethic, business owners might struggle with certain things. For example, you might not be able to get the funding that you need, however, here are some tips that might be able to help you.