All types of businesses- whether big or small, face up to different financial challenges. For many business owners, seeking financial assistance is best achieved by maintaining a good business credit. Just as it is important for consumers to take care of their personal credit history, business owners must strive to keep their business credit in excellent standing and use it to their advantage.
It is no secret that banks and lending companies prefer to accept clients with an impressive business credit history. When you submit an application for a business loan or a business credit card, the first thing that lenders and credit card issues do is to check the applicant’s business credit report. A business owner can get approved or declined for a business loan or a business credit card based on the credit score.
What About New Businesses?
Every business owners who enjoys good credit has to start from somewhere. If you’ve just put up your company, then understandably you have yet to establish your business credit history. Does this mean you can never get approved for a loan or a credit card for business?
Lending companies and business credit card issuers take into consideration the length of time a business has been in existence. New businesses that have just opened for new accounts recently may be extended a loan or credit card based on the business owner’s personal credit history. Yes, if you are a business owner, you personal credit history will be used in place of a business credit to determine your application’s approval.
Establishing Business Credit
How can a new business establish business credit? Registering your business with your local state government is a basic requirement. Make sure that you can provide a business address and a business telephone number to prove your company’s existence. You will also be asked to submit Federal Tax Identification Number (FIN) or Employer Identification Number (EIN) if you have employees working for you. If you’re a Sole Entrepreneur, you must submit your Business Tax ID number, instead of the EIN.
It is recommended to register your business with a major business credit tracker like Dun & Bradstreet, Experian Business, Equifax Business or Business Credit USA. Take note that the business credit bureaus work separately from consumer credit reporting agencies like Equifax, TransUnion, and Experian. By signing up for a business credit tracking report, you can be sure that your business transactions with lenders and other financial organizations will be recorded.
When applying for new accounts such as a business loan or a business credit card, see to it that the lender or the business credit card issuer will report your payments to the business credit bureaus. Remember that not all business loan lenders and credit card companies provide the credit reporting service. If your lender or business credit card doesn’t report to the business credit bureaus, you will not be able to build a separate credit history for your business.
A business owner may need to wait for a year before he/she can request to completely separate business and personal credit history. By establishing your business credit as early as possible, you can enjoy freedom from the personal liability clause in all your business accounts. You can also benefit by having the power to negotiate with prospective lenders and ask for better terms on account of your excellent business credit.
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Pamela Williams is a Loan Consultant, Internet Marketer and Writer. For years she had helped consumers and business owners especially regarding business credit cards. This resource is dedicated particularly on business credit card reviews, articles, tips and advice, and online application so that consumers and business owners may compare which is the best business credit card for their business. Copyright 2010 |
I am wanting to start a business in my town but need a business credit card to start it up. I have chosen to incorporate for future progress and would like the company to stand alone. How can I get a line of credit to start a business in this economy? I am a stay at home mom and rely on my husband’s income. We could use his name and personal history, but I would prefer not to do that. What are my options for getting started?
Hi Julia, unfortunately obtaining a business credit card is much harder for people with no credit of their own. Your husband would have a better chance at being approved. Since you are incorporated you can start out with a personal credit card and write it into your corporate books that this card is only to be used for business purposes and you MUST stick to that. Once you have established your own credit you can then apply for a business credit card, but please note that it may take a year or 2 of building up your own credit before a business credit card company will even consider approving you.
One of my thoughts for business credit is separation, it takes you to another level as a individual in personally focusing on your level of success.
@ loyalcreditjournal
Yes, you’re very right. Thank you for the comment