Good credit history is vital if you want to establish credibility with lenders. There are steps you can follow to build your credit history. This includes opening business accounts and maintaining your credit score. These steps are critical to helping you establish credit for your business and getting the financing you require.
For lenders to trust you, it's crucial to establish business credit
First, open a checking account for your business. The account should be opened in the same bank that your personal account. A business checking account will make it easier for you to obtain loans and increase your capital access. You should also obtain a copy the business credit report and be able to read it. It is vital to regularly review your credit score and business report.
Your business credit report will contain information about your registration status. Most businesses are registered with their local government. You must register in the home state of any foreign-owned or unincorporated company. It is also important to acquire any necessary business or professional licenses. Many commercial credit agencies use public information to assess your creditworthiness.
New accounts are opened to increase business credit
Small business owners can get trade lines of credit from many lenders to buy equipment and make improvements. These lines often carry high interest rates, so it is important to open several of these accounts to build business credit. These changes may take some time to appear on your credit report.
You should also establish a legal entity for the business. This could be a sole proprietorship or a corporation. It is important that you obtain a business telephone line. This adds legitimacy to both your business and the government. Once you have your business phone number, it is possible to open business accounts.
In addition to opening a business bank account, you should establish at least one tradeline with a local vendor. These accounts are also called "Net 30" or "Credit 30" accounts. You can buy items on credit, and pay them back later. Tradelines are used to purchase office supplies, electronics, and marketing material. You should inquire about the credit bureaus that the vendor reports to before you sign up to a tradeline. These tradelines won't help build credit for your business.
Monitor your credit score in business
It is important that your company has a good understanding of its credit score. This is not only an effective way to prevent identity theft but can also be used to identify unauthorized accounts. It can also help you visualize your business' financial health. It can even help you obtain trade credit and financing you might not be otherwise able to.
Your business credit score is based on several factors, the most important of which is your payment history. Despite this, not all lenders base their decisions only on one number. It is a smart idea to sign up for credit monitoring services in order to keep track of your score. Bullseye Finance Group offers a package that includes five types and a reasonable price. Their packages also include risk and failure scores and key performance indicators (KPIs).
Different agencies use different scoring scales. For example, the Paydex business credit score is based on your payment history and trade references from vendors. High scores mean that your business is more risky and can be offered better terms.