As we come to the end of 2009 and prepare to celebrate the New Year with hopes of recovery, growth, and prosperity small business owners like you need to start a business credit plan.
Banks, lenders, vendors, leasing companies and others are making adjustments, adopting new rules, and facing new regulations in the lending arena.
The National Small Business Association (NSBA) says 55 percent of the small business owners it polled had been affected by the credit crisis this past year and that number has now increased to 67 percent. The three biggest concerns in this survey were general economic uncertainty, rising energy costs, and the rising cost of health care.
Now more than ever I believe that you need to be pro active this year and embrace a new level of preparation, compliance checks, and business credit preparation in order to stay ahead of the game and keep your business in a strong position by having access to capital.
Here’s my ‘Top 10 Business Credit Strategies for Small Business Owners’
When it comes to bank financing a business plan that supports a loan request provide a greater chance for funding.
Treat your business like a business and avoid being a sole proprietorship.
Obtain a Federal Tax ID for your business
You’ll need an EIN in order to open a corporate checking or bank account. Also, if your corporation is planning on hiring employees in the near future the corporation will need the EIN for payroll taxes, state taxes, and in order to make tax deposits (federal) on a timely basis.
Open a small business checking account with a bank and establish a business credit line. Make sure the bank you deal with reports to one of the business credit bureaus. While there is thousands of banks across the country not all report your business loan payments to your small business credit reports. Do business with banks that report your payment history!
Separate your personal credit file from your business file
This can be accomplished after you carefully follow corporate conformity guidelines that prevent your business from being ‘flagged’ by the business bureaus. Dun & Bradstreet conducts over 2,000 compliance checks alone!
Do business with companies that extend vendor credit and report your payment history
There are over 500,000 vendors extending credit to businesses in the U.S., but less than 6,000 of them report your payment history to your business profile. You have to make sure you choose the right vendors to do business with.
Apply for SBA financing only after you have established business credit scores.
The SBA recently reported that 97% of applicants for a small business loan are declined. Why? Entrepreneurs who go directly to their banks inevitably fail to meet the compliance requirements. And most have no business credit established.