Business Credit for New Business: A Beginner’s Guide
New businesses often struggle to obtain credit. However, establishing business credit early on can help you access funding for expansion. This guide explains how new businesses can build credit from scratch.
Step 1: Register Your Business and Obtain an EIN
The first step in securing business credit is registering your business and getting an Employer Identification Number (EIN). This separates your business finances from your personal ones, making it easier to qualify for credit.
Step 2: Open a Business Bank Account
Open a dedicated business account to manage your finances. This will also be required when you apply for business credit, as it proves you’re serious about maintaining separate business finances.
Step 3: Apply for a Starter Business Credit Card
Many new businesses can apply for a starter credit card with low limits. Although the limit may be low, using it responsibly will help you begin to establish a credit history.
Step 4: Work with Vendors That Report to Credit Bureaus
Some vendors offer net-30 or net-60 payment terms that can help new businesses build credit. These vendors report your payment history to credit bureaus, allowing you to establish business credit quickly.
Step 5: Pay Your Bills on Time
Timely payments are key to building good business credit. Ensure that you pay all your bills, including loans, credit cards, and vendor accounts, on time to maintain a positive credit history.
Step 6: Monitor Your Business Credit Score
Regularly monitor your business credit score to ensure that your efforts are paying off. This will help you identify any issues early and maintain good credit standing.
Conclusion
Even as a new business, you can start building credit by taking these essential steps. With the right approach, your business can gain the financial stability needed for growth and success.