Building Small Business Credit Without Personal Credit

Building small business credit can be difficult without personal credit. You need credit in order to create cash flow to start and maintain your business. Good credit will also provide with added perks, such as lower interest rates and lower payments for your loans. Follow a few tried and true ideas to build your credit and get your credit up and running for your business.

Get Incorporated

It is important to separate your business from your personal credit. Forming a corporation, or LLC (limited liability company), is a way to get credit for your business. With these entities, lenders can grant credit without viewing your personal credit report. If you structure your business as a partnership or sole proprietorship, creditors are more likely to include your personal credit as part of their loan. Once your business is incorporated, you will get a tax identification number. This number works like a social security number. It provides a basis for a credit history for your business and excludes your personal credit from the business.

Register with Business Credit Bureaus

Dun and Bradstreet is the largest credit bureau for businesses in the United States. Once you register, you will be given a Duns number which identifies your business. Then, you can start to build your credit file and advertise it to other businesses. It is very important to monitor your transactions and payments to review how your credit rating is affected.

The other two top credit bureaus that rate business credit are Equifax and Experian. When you do business with a company, make sure they are reporting all transactions to the business credit bureaus.

Have a Detailed Business Plan

A business plan outlines your objectives and ideas and establishes your short term and long term goals. Be honest in your calculations and avoid optimism. You want to outline the worst case scenarios and have a contingency plan for those situation. Your plan is a great tool to share with lenders and investors, so be accurate. Plan to cover the best, worst and middle of the road calculations to provide a good overview of your business. A lender wants to know that you are serious and that you have a plan to handle adversity.

Set Up Business Accounts

Another way to build small business credit is to set up a checking account for your business that is totally separate from your personal account. To do this, you will need your tax identification number. This will help ensure your credit stays separate from the business and also looks more professional for customers.

You can also apply for secured business credit cards. These cards are designed for business owners with no personal credit. Sometimes a deposit is required to acquire a line of credit. However, it is helpful to have the card when you are building your credit. Building small business credit is not easy, but putting away some money in a designated business account, will build your credit and help you keep up with any deductions for tax season.

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