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For business owners, it is very important to have a good line of credit for your business, so you can afford to buy supplies, inventory, or any other needs that your business has on credit, which allows you to pay the bills off in installments, instead of having to come up with a lump of cash to pay everything up at once.
Vendors are reluctant to get into business with companies that do not have an established line of credit, or a long history of making timely payments on their debts, which is one of the biggest reasons you need to establish a line of business credit, that has a high credit score, due to the fact that you make regular payments on all your business purchases. Having a lot of transactions with different vendors and paying them off on time, improves the likelihood of you getting a line of credit extended to your business from a firm you haven't done business with in the past.
Luckily, building your business credit is not as complicated as it sounds, and you just need to follow a few simple steps to establish a good line of business credit, which will help your business grow, regardless of your own personal credit history.
Steps to Building Business Credit
Step 1: Opening a line of credit.When some people start their business, they have to use their own personal credit to fund it, because the business is a sole proprietorship, or a partnership, which means you can't separate the business credit history from the owners. However, if you incorporate your business, or form a limited liability corporation, the business is legally separated from the owner, and can have its own line of credit. You should also open a business credit file with the three major credit reporting agencies, TransUnion, Equifax, and Experian.
Step 2: Get a federal tax identification number.A federal tax identification number or EIN is basically the social security number for your business, which is what you will use to apply for your business credit line, and also file your business taxes.
Step 3: Open a bank account.Once you have your EIN, you should open up a bank account for your business, and all your business transactions should go through the business account.
Step 4: Open phone lines with your business name.You will need to get one or more phone lines registered to your business, and have them listed, so your business number can be found by vendors and credit reporting agencies.
Step 5: Get a business credit card.You need to have at least one business credit card registered to your business, and used only for business purposes. The card should be issued by a company that reports to the major credit report agencies.
Step 6: Open a line of credit with vendors and suppliers.You need to establish a line of credit with a minimum of four vendors, and you should have them report your payment history to the major credit reporting agencies.
Step 7: Make sure your payments are made on time.This is the most important step in building your business credit, timely payments will show future vendors and loan specialists that you are a business owner that can be trusted to make payments when you are supposed to, which will make them willing to do business with you.
These seven steps are all you need to establish a line of credit for your business, and also build your business credit. Following them will help you get in business with big vendors, and get business loans from banks, which will help your business grow even bigger.
Spartan Credit is the premier source of business credit for new and emerging businesses. We help your company move to the next level. Contact us now to help you fulfill your next shipment or fulfill your inventory needs. We have hundreds of sources to get you the credit you deserve!
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