At some point you may need to borrow money to fund your growth. When that day comes, you’ll want to make sure that your business has a good credit rating.
To shore up your business credit rating, start by separating your personal and business finances. Stop putting business expenses on your personal credit card, and stop paying for equipment and supplies out of your personal accounts. If you must put more money into your business, make it an official loan with legal paperwork, advises Pedro Hernandez at Small Business Computing.
Register your business as a separate legal entity. To apply for a small business bank account or line of credit, banks typically require a tax or employer identification number from the IRS. These steps will not only help build your business credit rating, they’ll also help shield you from personal liability.
Next, apply and get approved for a small business credit card or loan, and start small if you can. A history of modest debts paid off on time is an ideal start toward a bigger loan at a favorable rate. And do business with suppliers who can report your payment history to business credit-rating agencies like Dun & Bradstreet.
Finally, be sure to monitor your business credit score. A business credit monitoring service like Experian or Equifax will tell you if you’re on the right track.
Adapted from 5 Tips for Building Good Business Credit by Pedro Hernandez at Small Business Computing.