Just like individuals, businesses of all sizes need to establish good credit in order to operate. After all, having a solid credit score will help you get a credit card for your business, open up a merchant account, receive the benefits of flexible payment terms from suppliers, buy or lease vehicles for your business, rent property, and enjoy the perks of lower insurance costs. But startups may have a pretty difficult time establishing good credit.
The tips below will help you take the right steps if you’re starting a new business and you want to ensure that it will have great credit.
Set Your Business Up as a Corporation
By establishing your business as a legal corporation, it will be considered its own entity. This is the very first step in establishing the company’s own credit. If you’re currently operating as a sole proprietor, your finances will the considered the same as your business’s finances, so you need to separate yourself, especially for your own financial protection in the event the company becomes insolvent or is sued. Once you’re incorporated, you’ll also receive a tax ID number.
Find a Great Local Bank
Local banks are often the first ones that will be willing to help out small businesses when larger banks aren’t helpful. Therefore, do your research into what banks are in your area that would be able to give you a business credit card and perhaps even give you a loan so you can start your business with the necessary funds.
Even if you get a business credit card with a low limit or you apply for a business loan in a small amount, rest assured that you’re working your way towards establishing great business credit. So rather than overwhelming yourself with too much potential debt, keep things small so that you can properly monitor and control your finances without getting carried away.
Pay Off All of Your Bills on Time
No matter what bills you have or what the terms are, always make sure to pay all of your bills on time in order to build your credit score. When it comes to a business credit card, a loan from a bank, payment plans with suppliers, or general overhead costs, the key is to remain debt-free if you want to have the strongest credit possible.
Keep an Eye on Your Credit Score
Once you have a credit score, keep a close eye on it by checking on it at least once every quarter. This will allow you to be on top of what’s happening with your score to make any necessary changes to prevent it from falling. Also, monitoring your credit score and your credit file is a great way to ensure that all of the financial information about your business is accurate.
In addition to establishing good credit when first starting out, you also want to limit your costs as much as possible. Do your research into articles like http://www.servcorp.com.sg/en/news-articles/business-articles/five-tips-to-reduce-business-costs-in-singapore/ to find out how you can take everyday steps to lower your costs and increase your profits.