Updated: Jan 30
Every small business relies on business credit instead of taking a loan for financial help. Business credit also help small business cover their short loans. So, it is worthy for people in business to build their business credit and grow faster to compete with the significant marketplaces.
However, if you are new in business and looking for the information to build your business credit, then here you are at the right place. Here we will discuss all business credit, how to build and apply for it.
Business credit is the ability of a small or large business to qualify for their financing. It has the annual credit reports and scores that help the business credit bureaus keep track of your business finance.
Your Business credit report helps lenders, creditors, insurance companies, suppliers, and many other organizations evaluate your credit scores or application when you bid for the business credits. Many business credit reports help to check your potential when you are looking for some potential partners.
The substantial business credits help many companies to get a variety of benefits like:
Suppliers and vendors provide higher trade credit limits
Bank offer favorable lending terms
There are better lease terms for machinery and real estate
So let's discuss each step of business credit in depth.
How To Obtain Business Credit?
Here is the step-by-step guide to obtaining business credit effectively. So follow every step and fulfill the requirements.
1. Put your business on the map
You are new in the business, so it is unnecessary to get your business on the map. But instead of placing the business on the map, get a separate business phone number and register it in the 411 directory. Open a separate business account with the legal business name and pay all the bills through it. Moreover, open a business credit file to build business credit.
2. Maintain good business relations
Try to establish and maintain good business credit relations with the vendors and suppliers to maintain a solid business credit line. It is like a bar of gold for the business's success to have industry-relevant tradeline vendors and suppliers.
If you have a strong relationship with them, you can avoid paying them the upfront money for the supplies and services. It also helps you build a positive business credit history to report to the business credit bureaus and agencies.
3. Get an EIN
Employer identification number or EIN is like social security. It is also referred to as the federal tax identification number. So get an employer identification number to obtain business credit and for opening the business bank account.
4. Open a business credit card
When you have a separate business bank account and employee identification number, you can open a business credit card. It helps to report the significant credit agencies to establish business credit. You can open a business credit card or multiple, but a single credit card also helps obtain business credit. Moreover, it is advisable to avoid overextending business finances and be cautious about it.
Now you can apply for the business credit as you have a separate business credit card and bank account to bid for it.
How To Apply For Business Credit?
There are a few requirements that you need to fulfill for getting the business credit. So let's discuss every step below.
1. Apply for a federal tax ID
First of all, get the federal tax ID and apply for it if you don't have one. It helps the credit bureaus and agencies t9o track your business value and reliability for awarding you the credit. You can apply for the federal tax ID through the IRS website by fulfilling its requirements.
2. Form a business entity
Set up your business entity like LLC, S Corp, and more to build your business finances separate from your finances. You can get advice from our Finance Care Specialist for a suitable business entity for you. Keep in mind that the decision you take also has the tax implementation, so decide it wisely and get a cost-effective business entity.
3. Apply for business credit
A business credit card helps you to establish your business credit. So it is essential to make your payments in full for every month, but if you cannot do then don't mix it. Keep in mind that higher business credit card utilization can lower the business credit scores. So if you have a low credit limit, then put in other expenses like hotel booking, tickets and declare them as a business trip. You can also apply for the second card for your convenience as well.
However, apply for the business credit in an appropriate agency or bureau. Keep in mind that these companies or agencies check your personal credit history and apply for the business credit. So the better your odds help you to get the effective interest rate.
How To Check Business Credit?
It is always essential to check your personal credit report. Similarly, business owners need to keep track of their business by checking their business credits.
Business credit has a direct impact on business financial conditions. A business credit record impacts the business credit that you receive and affects the interest rates you will pay, including business insurance premium rates. Moreover, the suppliers or customers can also check your business credit. So if you didn't maintain your business credit, then you will lose it without even noticing the fact.
Here are some free apps or software to check and monitor your business credit to maintain a healthy business relationship and grow faster.
NAV is a free service for customers and business owners to check the business credits.
Credit Signal is a free service from Dun and Bradstreet to check the credit report. But if you want detailed information, then you need to pay for it.
Credit.net is a paid service to monitor your business credit. It has a variety of packages.
Scorely.com provides the free credit report demo you need to register for the paid service.
CreditSafe.com is a credit monitoring tool that includes financial data, payments, risk rating, and many more.
All software mentioned above helps you check your business credit, and you can efficiently keep track of your finance and business credit reports.
We hope this article helps you in understanding every fact about business credit. If you want to access $100,000 in business credit with No-Doc's., Book a Free 30mins Consultation, So we can tell you exactly how to get funding: HERE