Top 5 Tips for Building and Maintaining Good Business Credit
Wed, 06/04/2014 - 5:42am | by Guest Contributor
There are a lot of responsibilities that come with running a business. If you want it to be a successful one, a top priority would absolutely have to consist of building and maintaining good business credit. Although, on the onset, it may seem a bit overwhelming to do, it doesn't have to be. As a matter of fact, we have provided five tips below that will provide you with "credit stability" in no time:
Figure out your business structure. Most businesses have an accountant and an attorney (even if it's just on retainer). The reason is to keep the books straight (accountant) and to provide wise counsel on how the company needs to be set up (an attorney). Make it a point to discuss with your own accountant and attorney about if it would make more sense to change your business to a corporation (otherwise known as an LLC). It provides limited liabilities, tax advantages and established credibility with customers, employees and vendors.
Develop a business plan. We all know the saying: "If you fail to plan, you plan to fail." Aside from it being a good idea for you to have a one-year, three-year and five-year plan in place (especially due to the fact that 50 percent of all businesses close within the first five years), when you're applying for a loan or line of credit, a business plan will be one of the first things that a lender will ask to review so it's smart to be prepared beforehand.
Open up accounts. So that you can keep your professional and personal life separate, it's a really good idea to set up separate accounts. This would include a business checking and savings account, a business phone line, and another other services that you may be needing including office and machine leases and any form of business services.
Be discerning with your credit cards. Many business consultants will tell you that while it's good to get some credit cards for your business (being that so many places accept credit cards for everyday use), you definitely don't want to rely on them for all of your expenditures. That's because it's just as easy for a company to find themselves in deep credit card debt as it is an individual. One way to avoid finding yourself owing more than you can really afford to pay is by committing to only using 35-50 percent of your credit card limit for your purchases and to strive to pay each charge off within the next 30 days.
Apply for business credit. Another thing that can help you to establish good business credit is to make a proactive effort to establish lines of business credit with vendors that directly report to credit card agencies. Some examples of such stores include Staples and Office Depot. When you opt to use their business credit options rather than cash and you make steady payments, this will let credit agencies know that you are responsible and reliable company and over time, your credit rating will increase. And the higher it gets, the more established, credit-wise, your business will become.