As an entrepreneur or a small business owner, you may not fully understand why building a business credit separate from your personal lines is so important.
A few differences between personal and business credit. Personal credit is automatically updated by the credit bureaus anytime you apply for credit, get a new job or change your address. Business credit is not always reported which can directly affect your ability to receive new lines or increases on your current ones. Many people don't understand that it is good to report your business credit on a regular basis to ensure future approvals for credit as well as higher credit lines.
Below are 7 tips you can follow to receive the full benefits of business credit through proper reporting:
1. Form a corporation or LLC to operate your business under and obtain an FIN or EIN from the IRS.
2. Register your company with the business credit bureaus.
3. Comply with the business credit market requirements.
4. Prepare financial statements and a professional business plan.
5. Find companies willing to grant credit to your business without a personal credit check or guarantee.
6. Manage your debt so you don't fall into trouble making your payments, which will negatively affect your credit score.
7. Make monthly payments to credit grantors to keep your business credit profile active.
Let's face it, if you want to expand your business with a new or larger line of credit, you should be reporting your history. It is better to establish a business credit right from the beginning so you are not affected by any negative or old personal credit lines.
Can you share some examples below on why else your personal credit history could negatively affect the outcome of getting a higher business credit line in the future?