While many new business owners rely on their consumer credit to start up a new company, this could actually harm your new company in the long run. Starting a new business gives the business itself the opportunity to build its own credit rating, which can give the business a lot of stability and a lot of discounts on the items that the business needs to run properly. All of the different purchases that come with a new business, from equipment and materials to utilities, can be placed into the business’ name to start building up a solid credit report. Here is how businesses build credit and some of the perks that come along with good business credit.
How the Process Works
The process of starting up business credit begins with the company owner filing for an identification number that is unique to the business, called a D.U.N.S. Think of this as the social security number for the business itself. All of the credit that is done for the company should go through this unique number. Once that number is established, which can take about 30 days, all of the necessary expenses should go through the business name and that identification number. This will help establish and build credit for the business. The more you can stick to a minimal credit utilization ratio, the faster the business’ credit score will rise. This means only using the credit available to the business when necessary, and paying down the balances of anything you do have to buy as quickly as possible. The less outstanding credit the business has, the better!
What Small Business Credit Can Do for Your Company
Being able to hand a trusted employee a business credit card to go out in your place and buy something the company needs is just one small benefit to having a positive small business credit report. Companies that sell the items your business needs are also more likely going to extend your business lines of credit when you need to buy new or upgrade your current equipment. Having a good small business credit report also can help you attract both investors and new clientele, as they will feel more secure conducting business with a company that has shown financial responsibility.
You should regularly go through and make sure that your small business credit report is accurate, just like you should with your personal credit report. This should be done to avoid being one of many small businesses that fall victim to fraud or identity theft each year. The closer watch you have over your credit report, the more likely you are to notice changes before they are so far gone that they could damage your company or the reputation you have worked so hard to earn. Establishing business credit from the day the company is started is going to be the best way for your business to have a solid credit file available when you need it most.
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