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5 Tips to Build Business Credit Fast

If your business is growing, you may need credit for inventory or more financial resources for the expansion of your operations.

5 Tips to Build Business Credit Fast

Others may require funding to acquire software to make their business more efficient and profitable. Whatever business plans you want to initiate, they require one thing: money.

Business credit isn’t difficult to establish, but it’s vital to think about and plan for it carefully. It’s better to begin now rather than later so you can build your credit more quickly.

The steps in this article will help you establish business credit so you can get approval when you finally need additional financing and gain access to better terms as well.

Here are some valuable tips to build credit for your business fast and in the right way:

1. Establish Your Business

Opening a business isn’t necessarily a sign that you’ve made yourself known. Until you’ve completely established your business, you can’t develop good credit. Have your business listed in the directory by registering a business phone number.

This is a necessity for any company. Additionally, you should open a business bank account under your registered business name, and you can use the funds there to pay for your bills. Establishing business credit requires opening a business credit file.

2. Acquire An Employee Identification Number

Obtaining an employer identification number (EIN) is the next step in building business credit. The Internal Revenue Service (IRS) uses EINs for tax purposes. A company’s EIN functions similarly to your Social Security number (SSN) for personal taxes.

If the owner of a sole proprietorship, partnership, or single-owner LLC does not have employees, their SSN can be used for tax purposes. However, other structures of businesses need an EIN.

Although it isn’t required, obtaining an EIN is nonetheless a good idea. In addition to providing business credit, the EIN allows you to establish your company’s identity. The IRS website makes it easy to apply for an EIN for free, so there’s no reason not to take advantage of it.

You’ll be required to provide your SSN or EIN when you’re interested in applying for a loan or a credit card for your business. The EIN will enable you to qualify for credit products and business financing if you have a business credit history.

3. Maintain Good Credit Relationships With Suppliers

business partners

Businesses consider a solid credit rating from industry-relevant vendors and suppliers a crucial matter. Excellent business relationships make it easier to avoid paying for goods and services in advance.

What’s more, credit terms are looser, and you have better communication with partners, too. Even if you only establish a good credit line or a one- to two-month credit term with a few vendors or suppliers that report their payments to business credit bureaus, you can already have a positive business credit history.

Though your suppliers may not be required to report to credit bureaus, you may need to practice proactive credit management and open accounts with those who do.

Check online resources on tips to improve your vendor and supplier relationships, and refer to blogs like Digital Honey for posts on how to improve your finances while building wealth.

4. Obtain A Business Credit Card

It’s a great idea to get a business credit card, which is completely different from a personal credit card, from a company that reports to major credit bureaus. If you can, apply for a number of business cards, which can add to your business credit score.

However, you need to be cautious in handling your business finances afterward. You don’t have to nor should you utilize all the credit available through your business credit cards.

5.Pay In Full And On Time

Business credit lines must be used responsibly once they’re opened. Depending on the model, you might only be considered creditworthy if you’re a creditor who always pays on time.

Another model, however, measures the timing of your payments. You’ll receive a higher credit score if you pay your bills faster. In this situation, it makes sense to pay your company’s bills as soon as possible if they’re reported to credit agencies.

With this credit score model, you can earn a higher credit score for your business. Maintaining a low credit utilization rate will help you build a good credit score as well.

Conclusion

The business credit process isn’t as straightforward as that for personal credit, but it’s not that difficult either. You can begin building your business credit by establishing your business first, getting an EIN, and acquiring a business credit card, or creating a supplier credit line.

Whenever possible, make payments early or on time, and keep a low credit utilization rate to maintain good credit health.

The credit rating of your business will improve over time. Then, you’ll be able to borrow the money you need to grow your business because of your excellent business credit history.

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