Who needs business credit? We can help you get it
Why, exactly, do you need business credit for your company? We’ve got the answers here – business credit works for all business and not just brick and mortar companies!
Why get business credit from the start?
If you’ve got an EIN, then the Internal Revenue Service states you’ve got a business. Yet if you only have personal credit, then you’ll be responsible for your company’s debts, and its tax obligations. You’ll even be on the hook for its bankruptcy, if that happens.
You do not want this. Split business from personal credit and it will not be a problem.
And in particular, fleet credit will specifically help your trucking business. And gasoline credit cards will, too. We all know how expensive it is to fill up the tank these days.
How Do I Build Business Credit? The Relationship Between Fundability and Business Credit
Business credit is important to the fundability of your business.
However, it is not the sole source of your business fundability. A foundation of fundability is necessary for business credit, and business credit is necessary for fundability. If you have poor business credit, your business cannot be fundable.
Likewise, if your business is not set up to be fundable, you will not be able to build business credit. So, now you are really asking yourself, how do I build business credit?
How Do I Build Business Credit Step 1: The Foundation of Fundability
If you ever want your business to be fundable on its own, apart from you, it must be set up in this way. That’s not to say that your personal credit will not ever affect fundability, but if you do not set your business up to be a separate entity, business credit will never even be on the table.
Like any foundation, it is best to start at the beginning. It will be faster and easier if you do. However, if your business is already up and running, you may not have that option. That’s okay. It’s never too late to start, but start now. The longer you wait the harder it will be, for several reasons. How do you set up a fundable foundation?
Separate your contact information
The first answer to the question of how do I build business credit, is to separate your business from yourself. One step in this process is to make sure you and your business have separate contact information.
Your business needs its own phone number, fax number, and address. That doesn’t mean you have to get a separate phone line, or even a separate location. You can still run your business from your home. You don’t even have to have a fax machine.
In fact, you can easily get a business phone number and fax number that will work over the internet instead of phone lines. Even better, the phone number will forward to any phone you want it too so you can simply use your personal cell phone or landline. Whenever someone calls your business number it will ring straight to you.
Faxes can be sent to an online fax service, if anyone ever happens to actually fax you. This part may seem outdated, but it does help with appearances.
You can use a virtual office for a business address. This isn’t what you may think. it is a business that offers a physical address for a fee, and sometimes they even offer mail service and live receptionist services. Also, there are some that offer meeting spaces for those times you may need to meet a client or customer in person if you do not have a place.
Get Your EIN
The next thing you need to do is get an EIN for your business. This is an identifying number that works in a way similar to how your SSN works for you personally. Some business owners use their SSN for their business. However, it really doesn’t look professional to lenders, and it can cause your personal and business credit to get all mixed up. When you want to work on fundability and business credit, you need to apply for and use an EIN. You can get one for free from the IRS
Make sure you Incorporate
Incorporating your business as an LLC, S-corp, or corporation is necessary to both fundability and business credit. It lends credence to your business as one that is legitimate. It also offers some protection from liability.
Which option you choose does not matter as much for fundability as it does for your budget and needs for liability protection. The best thing to do is talk to your attorney or a tax professional. What is going to happen is that you are going to lose the time in business that you have. When you incorporate, you become a new entity. You basically have to start over. You’ll also lose any positive payment history you may have accumulated..
This is why you have to incorporate as soon as possible. Not only is it necessary for fundability and for building business credit, but so is time in business. The longer you have been in business the more fundable you appear to be. That starts on the date of incorporation, even if you were in business before that time.
Open a business bank account
You have to open a separate, dedicated business bank account. There are a few reasons for this. First, it will help you keep track of business finances. It will also help you keep them separate from personal finances for tax purposes.
Also, there are several types of funding you cannot if you do not have a business bank account. Many lenders and credit cards want to see one with a minimum average balance. In addition, you cannot get a merchant account without one. That means, you cannot take credit cards payments. Studies show consumers typically spend more when they can pay by credit card.