Businesses with strong credit have better access to credit at lower interest rates than credit-challenged businesses. Businesses without business credit often rely on the personal saving or personal credit of their owners when inevitable cash-flow issues arise. Building business credit as soon as you open your business will help reduce your risk of failure and will help protect your personal assets and personal credit.

Building business credit

Building business credit

There are some easy but critical steps any business can take to begin building business credit and improve access to business capital.

The first step is to create a separate, legitimate business structure. While sole proprietorships are easy to establish, they are not considered separate legal entities and must therefore rely completely upon the owner’s personal credit. Bookkeeping and tax filing for sole proprietorships is also not as clean.

Businesses that are either incorporated or organized as LLC’s are distinct legal entities. These structures allow the business to build credit separate from you, the owner. Simply structuring your new business as a Corp or LLC does not mean that you can immediately avoid the need to act as a Personal Guarantor on start-up financing, but it is a critical first step to building business credit.

In addition to creating the legitimate business structure, you’ll need to acquire a Tax ID and a D&B DUNS number. The Tax ID shows that the US government recognizes your business and the D&B DUNS number establishes a credit file in the name of the business.

Another key step that will directly impact your ability to access business funding is the existence of bank checking and savings accounts in the business’ name. These business bank accounts allow any lender or vendor to more easily evaluate the cash flow and overall health of your business.

Finally, building actual business credit requires you to establish accounts with lenders and other vendors. LendSpark can help you establish new bank lines of credit and assist you in securing equipment leases on business machinery, computer systems or other equipment. Your vendors may also be willing to grant net 30 accounts for you. In every case, you need to make any business loan payment or vendor payment on time in order for your business credit rating to rise.

LendSpark offers a wide variety of solutions and our experienced professionals will present you with the best fit for your needs, budget and business profile.

 

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