How To Build Business Credit


Having their own  business  is something many millions of people dream of doing. Many do, of course, but so many others never quite get around to it. One of the factors that may discourage people from getting that  business  off the ground, is a lack of start up capital; and another may be the risk of losing their own money.

With a bit of thought, planning and effort, though, it may be possible for you to not only raise some start up capital, but do so through  business  credit. In other words, borrow against the  business  rather than personal assets.

You may be thinking that you have no  business  yet. That may be so, but it does not mean you cannot obtain  business  credit to get your plans started

Building  business  credit is completely different from building personal credit, and it is best to keep them separate if possible. Some credit reporting agencies will sell a  business  FICO score based on both the risk of the  business  and the personal credit of the owner. In some instances, the owner’s personal credit is linked to the  business  credit, separate credit records are profitable. You should also bear in mind that you do not have the same credit protection laws with  business  credit as you do with personal credit.

There are some important steps to follow in building a good  business  credit record. Here are a few for you to take into account:

1. Prepare  Business  Plan And Structure

You are now in the world of  business  credit, not consumer credit. This means that you are trying to project yourself in a  business-like  way. In preparing yourself to do this, you will have the added bonus of preparing yourself for the transition from being an employee to being a  business  man or woman. The more  business-like  you become, the better your  business  will do in the future.

But first things first. Your first job is to convince potential lenders you are going to have a viable  business . The quality of your preparation is important; if you go seeking  business  credit without doing your homework, you will be sent back to the drawing board.

To begin with, set up a proper  business  structure, and if you require any licenses, make sure those are in place. Also, prepare a  business  plan, with the aid of an advisor if necessary. You can use this to show that you have thought about the  business : the products, the markets, the competition, pricing, and all the other elements of the  business . Be prepared to defend your projections for sales, and your estimate of start up and running costs.

Again, this has the added bonus of being a good preparation for you, regardless of seeking credit for your  business . You will become a better  business  person for preparing your  business  plan. Hopefully, that will stand you in good stead as your  business  grows successfully. Planning will become a part of your monthly or annual routine.

Another preparatory move that will help you is, in the US at least, getting a  business  credit profile. This can help you to build up  business  credit without using your personal credit. The benefits in having a  business  credit profile are many. Most importantly, you will have more cash for the  business , convenience in purchasing, protection of your personal assets, limiting of personal liability from the  business , and the ability to prepare your  business  for future lending needs.

2. Become A Good Credit Customer

You will, of course, need to buy equipment, services, stocks and other materials for your new  business . If you can find vendors who will grant you credit, all the better; but is best if they are companies who will report your credit history to the major  business  credit reporting agencies. Dunn and Bradstreet is probably the best know internationally. Unlike with personal credit ratings, or FICO scores, with  business  credit scores income or income potential play an important roll. The top scores are reserved for the large stable  businesses , but with careful and diligent  business  and crdit practice, you too can achieve a good credit rating.

3. Obtain A Credit Assessment

In order to enter the  business  credit market, it is best to do a credit assessment. This will determine if you comply with the lender and credit bureau’s requirements. Once you have done that, look for  businesses  that issue credit without the need for established  business  or personal credit checks or guarantees. Once you have transacted  business  with vendors on credit, you can utilize those references to build your credit profile with the credit reporting agencies.

In many US states, there are non-profit organizations and/or government organizations that will help you with obtaining  business  credit. Often there are loans available for start-up  businesses  or even government grants. Check your state government, or national government if not in the US, web sites for such organizations.

Many retired, or semi retired, businessmen volunteer to help start-up  businesses . If you can, take advantage of such help; it will all build your knowledge as you set out on the road to a successful  business  with a good credit standing. Experienced  business  people will forewarn you of many of the pitfalls of starting your own  business , and you will be better prepared.

Source by Roy Thomsitt

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