If you're looking to establish business credit in the United States, there are a few important steps you need to take.
Building business credit is crucial for companies of all sizes, as it plays a major role in their ability to obtain funding. By taking the time to build up business credit, businesses can improve their chances of being approved for loans and lines of credit, which can be used to finance expansion plans or cover unexpected expenses.
A business credit score is important because it shows lenders how risky it would be to lend money to your business. Most small business lenders like to see a business credit score above 75, but local lenders may consider lower scores for small businesses or startups. The higher your business credit score, the more likely you are to get approved for a loan and the better terms you’ll be offered. If your business credit score is below 60, it’s critical that you take steps to improve it.
While the process of building business credit may seem daunting, there are a few simple steps that can get you started on the right track. In this blog post, we'll discuss five crucial steps that will help you get started on the path to business credit success!
Step 1: Determine the Best Business Structure for You.
The first step to building business credit is choosing the right business structure. This will help you keep your business and personal finances separate, which is important for maintaining a good business credit score.
There are a variety of business structures accessible to new businesses, such as partnerships and corporations. Each corporate structure has its own set of legal and tax requirements. The best business structure for you will be determined by your company goals. Take the time to research thoroughly so you can pick the ideal structure for your needs.
Step 2: Obtain a tax identification number (EIN) from the IRS.
Many people think that their Social Security number is the most important number in their life. However, for business owners, an EIN (Employer Identification Number) can be just as important. An EIN is a unique nine-digit number assigned to a business by the IRS. It is used for tax purposes and for other things such as registering a business entity, obtaining a business loan, and opening a business bank account. In some cases, businesses are required to have an EIN in order to file their taxes.
The IRS has an online service that lets you apply for an EIN for free. Alternatively, you can file your application through the by mail, fax, or phone for international applicants.
Applying for an EIN online is quick and easy. The applicant must have their own personal Social Security number, the business’s address and founding date available. Once all the information is gathered, the application process takes just a few minutes. After the application is complete, the applicant will receive their EIN instantly. Applying for an EIN online is the easiest method and is highly recommended.
Step 3: Open a new business bank account.
Once you have your EIN, the next step is to open a business bank account. As a small business owner, you have a lot of financial responsibilities. From keeping track of revenue and expenses to paying taxes, there's a lot to keep track of. A business bank account can help make things easier and give you some peace of mind.
First, it provides financial protection for you and your business. All of your business transactions will be in one place, which makes it easier to keep track of expenses and income. This can also help come tax time - you'll have all of your documentation in one place and won't have to hunt around for receipts.
Second, a business bank account gives you a greater degree of professionalism. Customers and clients will see that your business is organized and serious about its finances.
Lastly, business bank accounts offer a variety of features and services that can be beneficial for small businesses, such as access to credit products, cash management accounts, and more.
Be sure to shop around and compare different business bank accounts before you make a decision.
Step 4: Establish credit history with vendors and suppliers who report to the major credit bureaus.
The fourth step is to establish credit with vendors or suppliers who report to business credit agencies. This means that when you make on-time payments, it will be reported to the agencies and will help improve your business credit score.
CredGrow is a great option for businesses of all sizes who are looking to establish business credit. We offer access to growth resources and can help you build business credit immediately—no credit check needed!
A CredGrow line of credit gives you the ability to purchase all sorts of products and services that will help your business. When you open a CredGrow account, we instantly issue you a line of credit which we report to all the major business bureaus. You make small monthly payments as your line of credit is used. Continue to utilize the line and make your monthly payments to continue to build your business credit. This will positively demonstrate your ability to manage credit responsibly and make timely payments. With time, you will qualify for better terms on future lines of credit and loans. So don't wait – open a CredGrow account today and start building your business credit history!
Step 5: Keep an eye on your business credit reports.
The final step is to monitor your business credit reports regularly. As a business owner, it's important to keep an eye on your company's credit report so you can understand and leverage your score.
Fortunately, you can get free business credit reports from Experian, Equifax, and TransUnion. We recommend checking them at least once per quarter so that you can catch any errors or negative information early on. If you see something that doesn't look right, don't hesitate to dispute it with the credit bureau. By taking these proactive steps, you can help ensure that your business has a positive credit history.
If you follow these steps, you'll be well on your way to building business credit that will be key to the financial stability of your business. Establishing business credit is an important part of running virtually any successful company, so be sure to put these steps into action today!