7 Steps to Build your Business Credit FAST!!!
By Turtle Credit Team
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BUILD YOUR BUSINESS CREDIT
As a Business Owner, you can use credit for expensive things such as Startup Business Loans, Line of Credit to pay employees, or Commercial Loans to fund your next multi-million dollar project. We all have to start somewhere.
7 Steps to Build your Business Credit FAST!!! is a step by step guide to get your Business Credit started and on your way to better cash flow.
Step 1. Establish a business address and phone number.
Step one is to establish your business address and phone number. Your business address can be your residential address, so don’t have to worry about buying office space just yet. If you want to separate your business mail from your private mail or want a separate address, you can use WeWork or a UPS box.
Having your business phone number goes a long way when it comes to building your credit profile. You do not have to add another line to your current cell phone plan. Google voice has phone numbers for free (personal use/single lines), or you can get a business line with up to 10 users for just $10 per month.
Step 2. Incorporate your business.
Next, incorporate your business as a bonafide entity. That said, there are many different ways you can set up your business, and each one has its pros and cons. The base three types of business entities are sole proprietorship, partnerships, and corporations.
- Sole Proprietorships are the most popular small businesses. Most Uber Drivers and Barbers are sole proprietors. If you are involved in a low-risk business or just starting, a Sole Proprietorship maybe the business entity for you.
- Partnerships are another route to go If your business ownership has more than one individual. You have three types of partnerships, General Partnership, Limited Partnership, and Limited Liability Partnership. The most significant difference between the three falls on who is held liable. In a General Partnership, all party members are held responsible for the business. In a Limited Partnership, there is one main person who has unlimited liability. However, in a Limited Liability Partnership, everyone has limited liability. Partnerships are usually for individuals who are just beginning.
- Corporations have a few different corporate setups: C-Corps, S-Corps, B-Corps, and Limited Liability Corporations. When it comes to picking your corporation, ask yourself these two questions, “how risky is my business?” and “how will I be taxed?” Check with your state and local governments to make sure that you have all the right licenses in place to get your entity started.
I know this sounds like a lot, but luckily technology has made it easy to incorporate online. Start your company today for $0 with Incfile.com.
Step 3. Get an employer identification number (EIN)
So, Old Uncle Sam – The United States Government that is, wants to get in on the action if you are operating a business in this country. Therefore, you will need an Employer Identification Number or “EIN.” That number is like a Social Security number for businesses. The Federal Government uses it to track your business for tax purposes. An EIN is an excellent way to separate your business taxes from your personal taxes and is a requirement if you incorporate your business. Obtaining an EIN is free, and you can apply for it online on the IRS website. Click here to get started.
Step 4. Apply for a business DUNS number.
The Data Universal Numbering System, abbreviated as DUNS or D-U-N-S, is a proprietary system developed and managed by Dun & Bradstreet (D&B) that assigns a unique numeric identifier, referred to as a “DUNS number” to a single business entity. Dun & Bradstreet is the gold standard when it comes to business credit. Most companies look at a business’ DUNS number to verify business credit and legitimacy. That is why it is mandatory to apply for your DUNS number if you want to build business credit fast. You can easily apply for a DUNS number online by clicking here.
Pro Tip – Keep your business information current with the credit bureaus by checking your business credit at least once a week.
Step 5. Open a business banking account.
Now that you have your EIN and Articles of Incorporation, let’s open up your Business Banking Account. It is essential to separate your personal finances from your business finances. When tax season comes around, you will have a record of all revenue and expenses. Keeping track of your payments will help you obtain valuable tax write-offs.
Do your research when selecting a Bank that is going to meet all of your banking needs. I like NOVO; they are backed with FDIC insurance and do not charge monthly fees. You can open an account online in under 10 minutes. The best part is their state of the art app that integrates with other small business tools such as Quickbooks and Stripe. Click here to check out their accounts.
Pro Tip – if you need additional legal biding documents such as “Operation Agreements, Bill of Sale, Lease Agreement” or etc., check out: FormSwift
Step 6. Get a business credit card or business line of credit.
Let’s establish your Business Credit by applying for a Business Credit Card. When you visit your local bank to open up your Business Account, the Banker will ask you about opening up a Business Credit Card. Banks are eager to entice you with “double the points” programs and other offerings and even “sweet” sign-up bonus. You might be thinking, “what’s the catch”? Well, initially when you apply for business credit cards, Banks will pull your personal credit report, and you will be a personal guarantor. Meaning if your business can’t pay this debt back, the personal guarantor will be required to do so.
If you have fantastic personal credit and are ready to start building your business credit, go for it! If you have less than stellar credit or don’t want to take on that risk, there are ways around building your business credit without utilizing your personal credit as a guarantor.
Pro Tip – Tradelines build credit. Use companies like NAV. They will report tradelines to all Business credit bureaus. This is one way to build Business Credit without you being a personal guarantor.
Step 7. Open vendor accounts.
Vendor Accounts are a great way to establish Business Credit without a personal grantor. So, what are Vendor Accounts? Vendor Accounts are Net 30, Net 45, and Net 60 accounts meaning a supplier will give the purchaser 30, 45, or 60 days to pay for goods and services. Vendors will report your Trade references to the Business Credit Bureaus such as the Duns & Bradstreet and Experian Business. Here is a list of Vendor Accounts that are easy to get business credit approval and they do not pull your personal credit.
Pro Tip – Pay all of your business’s bills and loans back on time.
Overview
That’s it! These are the Seven (7) Steps to a solid Business Credit Profile. Following these basic steps will set your business credit up for the long run. Remember to pay your bills on time and try not to over-extend yourself.
Read more about How to save credit.
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Articles: Business Finance
Business incorporation refers to you listing your business as a separate entity. Incorporating comes with a variety of benefits for your business as it gains value.
Are you looking for a way to incorporate your business without all the confusing overpriced fees? Well, the Turtle Credit Team has put together a guide to show you how to incorporate for FREE!!!
This is a step by step guide to get your Business Credit started and on your way to better cash flow.