You can start building your business credit even before opening your doors for business.
- Establish your business as a separate entity in order to separate your business credit profile from your personal credit profile. This means you want your business to be structured as a corporation (a limited liability company, or LLC, is most common for small businesses).
- Make sure you have a well-written business plan, which includes all of the sections typically found in such a plan along with the necessary financial details. Be prepared to defend everything in your business plan by showing how you came up with your figures and developed your plans. In addition, before progressing any further, you need to make sure that you have all necessary licenses and/or permits to start and run such a business. Your initial goal is to establish a viable business on paper, with all of the details already in place.
- Find out exactly what the requirements are for lenders and for credit bureaus. By doing such a credit assessment, you will know what standards are expected before you start to establish and build a credit profile. It’s always advantageous to know what is required of you before embarking on any such project.
- Start making initial purchases for your business. This is where you will need to invest in your business or have individuals you know who will invest. Then use that money to make purchases from vendors who will:
- Let you establish credit based on your personal credit background
- Report your transactions to the credit bureaus.
- Pay within the set terms of suppliers.
- Make sure to work with suppliers who are reporting your prompt payments.
- Try to limit the number of inquiries regarding your credit profile.
- Do not overdo it with business credit cards -– have a couple, not a dozen.
- Do not let licenses or registrations lapse -– make sure you are on top of renewals
or obtain any new licensing that you are expected to have for your business operations.