If your business is new, you may not be thinking about taking out a loan just yet, but the day may come when you do.
Figuring out how to access business financing and credit is a common quest for both new and existing small business owners. From startup costs to new expansion strategies, establishing a strong business credit profile with diverse accounts early on can help make your immediate and future business plans a success.
Eight steps to establishing your business credit:
- Incorporate your business.
- Obtain a federal tax identification number (EIN).
- Open a business bank account.
- Establish a business phone number.
- Open a business credit file.
- Obtain business credit card(s).
- Establish a line of credit with vendors or suppliers.
A big issue with financing a business is dealing with personal guarantees. A personal guarantee is a promise from a business owner that they are responsible for their business’s debt should the business be unable to pay the debt. 86% of businesses use their owners’ personal credit to fund their entrepreneurial dreams, and establishing business credit can help you draw a clear and important line between your personal and business finances and mitigate the need to sign a personal guarantee for business funds.
Now that you understand the importance of having good business credit, make establishing it and building your business credit a priority.
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