For a business owner, establishing new business credit is one of the most important things he or she can set up when starting up a new business. This can be done whether the company is a start-up venture or a sole proprietorship that has been converted to an LLC or corporation in order to establish business credit.
A business has to be its own entity such as an LLC or a corporation before new business credit can be established. It is also required for a business to possess a separate bank account for business, a business line as well as a yellow page listing before establishing your credit. You will also need to apply for a federal employer identification number that can be from the internal revenue service. Needless to say, your business contact information (business address, line, bank account number and billing address) must be consistent.
Establishing business credit is extremely important for a business as it enables you, the owner to keep business and personal accounts separated. By doing so, you eliminate the possibility of having only a personal guarantee to offer when you need to apply for a loan. Businesses naturally take on larger debts than personal accounts, and can be detrimental to your personal credit rating should your business fail. You also stand to lose your personal belongings to a failed business venture if it doesn't possess business credit.
Of course, as a new business, it is imperative that you deal with vendors that report to business credit bureaus, or credit reporting agencies. This is so that the bureaus have sufficient information to provide a credit report to end users who request it. Establish a pattern of having your vendors make regular reports, such as doing it each month. You may want to reconsider retaining the services of vendors that are unwilling or incapable of doing so.
Establishing business credit allows you to maximize your business opportunities while also protecting your personal assets.
