Black Enterprise offers a solid piece of advice for anyone looking to build their business credit report. This is different from a personal business credit report that starts the moment you begin a job or apply for financing. Any business will need investors in the long-run that will benefit their overall brand and increase profit. Investments may also help save a business in times of crisis.
The author offers four steps in building a business credit report. We shall discuss each step here. First off, he emphasizes the importance of establishing your entity right from the beginning. It is important to have an error-free beginning and to avoid changing your business entity a couple of times throughout the existence of your business. This includes planning for the long-term, which could mean incorporating your business in the future. Sure, you may start with a sole proprietor ownership, but eventually you will have to evolve. Align your system right from the start, which includes acquiring an Employer Identification Number, opening an account for the business, establishing your brand through a business website, and setting up your contact information and location. This keeps your business separate from personal matters, which invites partnership and growth.
Once you have the long-term mindset of your business, you can register your LLC or Corp with major business credit bureaus. Have all of your payment histories with your creditors, vendors, and suppliers put on record with the likes of Dun & Bradstreet and Experian Business. This will help you build a good business credit score and establish your profile as they monitor your payments every month. If you don’t feel comfortable doing this, Credit Advisors Council can help.
Many jump into the business without a good system established from the start. This leads to unfortunate problems that ultimately leads to the downfall of any good idea. Once you’ve laid down the essentials and the foundation of your business in the right manner, you can work on building your business credit profile. This also establishes the importance of having a long-term mindset. While it is true that we need to find established and good creditors, we also need to ensure that creditors would report your on-time payments. Do your research and don’t jump on-board of every opportunity to take a loan. Remember that not all creditors have your best interests in mind. If the company doesn’t have a good system, your timely payments may be forgotten and recorded at a later date. This can affect your credit history when you’re trying to build a good reputation.
The author highly recommends secured loans and secured credit cards. However, a word of caution when applying for these type of loans to build your credit history. You can lose your home for missed payments. Moreover, secured loans are known to have variable rates which can place your business at greater risk. In the case of secured credit cards, rates are almost always high and can go higher quickly. Moreover, they tend to have lower limits. Finally, take note that the recommended time you have to work on building your business credit report can take at least 1-2 years, if you’re careful and disciplined.