Business Credit Basics.. A "how to Guide"
This How To Guide is designed for all business owners. Weather you just started the business, or have been operating this business for years.
You will want to take these steps to ensure you get access to Capital & Credit to grow your business and of course to take advantage of the best interest rates.
I Have worked in the Business lending/finance industry for many years and can tell you that the little details make a difference.
#1. Keep your business information completely separate from your personal information.
Form a Business Identity. A sole proprietorship is easy to start, but there is no separation between you and the business. Forming a corp. or LLC,LLP will separate you and your personal assets from the business and provide you with a degree of legal protection. Forming an LLC is very easy to do. you can find the information on your Secretary of States website.
After registering your business, you’ll want to request an Employer Identification Number (EIN) from the IRS. In some ways, an EIN is like a Social Security number for your business. It’s a number that the government, business credit reporting agencies and others can use to identify your company.
Registering for an EIN is easy and free. To start the process, simply visit the IRS website to submit an application.
Once you have your Business registered with your state, and have your EIN , its time to open your business bank account!
It's highly recommended that you keep your business & personal finances 100% separate, so make sure that all of your business revenue is deposited directly into your business bank account, and make sure that all of your personal expenses are not paid with your business account.
Set up a business phone line, and make sure that number is listed with 411 directory assistance. There are so many inexpensive options out there that will forward all calls to your cell phone anyway. When lenders are looking at your business credit application they will be looking at little details just like this. Plus its a huge bonus when your phone rings , you know if its a business or personal call and can answer with professionalism.
What Kind of online presence do you have? that's another thing lenders prefer to see. Will they find anything when they "google" your business? Does your business have a website? are you still using a generic , free email? or a business email (Yourname@yourbusiness.com) do you have a business Facebook page, a business LinkedIn account? etc... If the lender cant find you online, they will wonder if your business is even real... also how are you finding customers? bottom line, it will raise "red flags"
#2. Get a D-U-N-S Number
Once you receive an EIN, you can contact D&B to register your business and request a D-U-N-S number. A D-U-N-S number is a nine-digit identification number that D&B uses to distinguish businesses from one another.
There is no charge to register your business with D&B. However, you might have to wait up to 30 days to receive your D-U-N-S number.
#3. Open a Few Vendor Accounts That Report Payment History
These would be accounts like Granger, Home Depot, Walmart, Staples etc... Some vendors may be willing to offer your business net-30, net-60 or even net-90 day terms even with no existing credit history. Just make every effort to pay on time or even early. Paying credit obligations on time is critical if you hope to build good business credit. Some business credit scores, such as D&B's Paydex Score are based entirely on your company’s payment history.