HOW TO BUILD BUSINESS CREDIT

Having business credit is of the utmost importance to qualify for business loans, contracts with the city or with the government and to qualify as a provider for large companies.

As well as your credit score, a good business credit indicates that you are a reliable customer, and with this, the banks understand that they are not taking a very large risk when offering a loan to your business.

Before starting to create credit, it is good to check if there is already a record in the name of the business. Some agencies, such as Experian and Equifax, automatically maintain a record using collection information and court records.

This also means that there may be incorrect information in your business record, something that undoubtedly lowers your credit score and it is important to clarify with the agencies or companies that have reported the information.

A business credit record is not created in a day or a year, and that is why it is important to start this process long before you need a loan with good terms. These basic steps will guide you through the process:

1.CREATE A CORPORATION

The first thing you should do is incorporate your business, be it a corporation or a limited liability company.

What this does is create a legal division between you and your business, or in other words, it protects you to your assets from any legal proceedings against the business.

2.OBTAIN A FEDERAL TAX IDENTIFICATION NUMBER (EIN)

The federal tax identification number, known as the Employer Identification Number (EIN) in English, is the identification number of your business in the Internal Revenue Service (IRS).

Just as your Social Security number allows you to file taxes and create personal credit, the EIN has the same function for your business.

3.OPEN A BANK ACCOUNT

Having a bank account exclusively for your business is extremely important because it is the easiest way for capital providers to see your cash flow.

Credit bureaus will also be able to see how you manage your finances and use that information to determine your credit score.

A bank account with several years of existence also gives even more security to the capital providers.

4.OBTAIN A BUSINESS CREDIT CARD

The most important step to establish business credit is to obtain a business credit card or get your first business loan, in InQmatic we can help you with this, you can start your process here.

When borrowing money and returning it, credit agencies see your behavior as a borrower, and this is reflected in your credit score.

When you are ready for another credit card or other type of loan, the capital providers will review that credit record to know if it is worth offering you a loan or not.

Everything revolves in a circle that if you have good behavior, you receive better financing offers.

5.BUY YOUR MERCHANDISE FROM VENDORS WHO REPORT TO CREDIT AGENCIES

Sellers can also report to credit bureaus, especially when they allow you to paydays or months after the transaction is made.

You only have to investigate with the same sellers if they report or not, and always try to get the inventory you need from those companies because it is of great benefit to your credit record.

Just as you would if it were a credit account, do not forget to pay on time or before to show that you are a good customer.

6.GET A DUNS NUMBER

The Dun & Bradstreet company is the credit agency most used by sellers and capital providers but you have to apply to open a credit file with this company.

The DUNS system is a business identification process. When you apply, you receive a 9-digit identification number (DUNS number).

The process is completely free but can last up to 30 days. It is not a requirement to be registered with this agency, but the credit ratings of this agency are used throughout the country and even internationally.

Sebastian

Sebastian was born and raised in the busy city of Abbottabad. As a journalist, Saad Mushtaq has contributed to many online publications including the PAK Today and the Huffing Post. In regards to academics, Saad Mushtaq earned a degree in business from the Abbottabad UST, Havelian. Saad Mushtaq follows the money and covers all aspects of emerging tech here at The Hear Up.Thanks