Building Business Credit For Startups

Building Business Credit for Startups

Building business credit is essential for your startup's funding ability. When you've registered a business, it's a separate legal entity and treated separately from you as an individual. However, this is not valid with a sole proprietorship but for LLCs, LLPs, and corporations.

Companies seek business credit to access startup costs or to expand their businesses. Therefore, a company needs to have a solid business credit profile established with various accounts early on to access funding.

Having a great business credit allows you to keep cash flow liquid, helps you save money, and will enable you to have access to assets or funds to grow your business. With bad business credit, you limit your potential to secure financing for your startup.

If you want to find out more about how you can build business credit, follow these simple steps to establish your startup's business credit and qualify for financing.

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1.     Establish Your Business

Establishing your startup will allow you to establish credit. The following can get done to put your business on the map:

·        Get a business phone number and list it in the directory

·        Open a business bank account in your business's legal name and use it to pay bills

·        Open a business credit file to set up business credit

2.     Get a Federal Tax ID Number (EIN)

Also referred to as an Employee Identification Number (EIN), this number is like a Social Security number for your business. The ID number is free and available online and can get used for the following purposes:

·        Open bank accounts

·        Filing company tax returns

·        Apply for business credit

·        Apply for licenses and permits

·        Secure business contracts

3.     Open a Business Bank Account

Your startup needs a bank account to build credit. Your business bank account should be at least two years old to apply for business credit and reflect an average daily balance cash flow. Lenders will analyze your bank reference on credit applications during a funding review.

4.     Establish Credit with Vendors and Suppliers

Statistics showed in 2020, 36% of small businesses got denied some of their requested funding due to their credit score. As a business, you should be working on building a good score, as, during the loan application process, lending companies will check a business's credit report.

Buy inventory, supplies, or other materials on credit so that the purchases and payments get reported to business credit reporting agencies. Make sure these vendors and suppliers report payments to reporting agencies and business credit bureaus before purchasing anything.

Continue to build a relationship with your vendors and suppliers so that you can avoid paying up-front for services or items. A strong business credit score also enables you to secure better interest rates for loans. These relationships can also serve as trade references on future credit applications.

5.     Pay on Time

It is very important to pay your bills on time to show you can successfully manage to pay your debt and you're reliable. Your business credit rating will negatively impact your business credit profile if you have a late payment history or severely delinquent payments.

6.     Open a Business Credit Card

An excellent way to establish business credit is by opening a business credit card with a creditor who reports to credit reporting agencies. Ensure you are cautious, avoid overspending, and pay your bills on time.

Some lenders require you to spend less than 30% of your total credit available before financing gets approved. Ensure you spend 30% or less of your credit card limit to improve your chances of a business loan approval.

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7.     Keep Taxes Up to Date

Filing business taxes promptly will ensure compliance. If you fail to comply, your business credit will get negatively affected. Should you ever encounter tax payment issues, seek advice from a tax expert.

8.     Maintain a Good Personal Credit Rating

Depending on what kind of business financing you choose, your personal credit can still impact you. This is also valid if your business is a separate entity. If your startup is new, the personal credit of all the shareholders will get taken into account by creditors. If a shareholder has more than a 20% share percentage, their personal scores will determine the business's creditworthiness.

9.     Monitor Your Startup's Business Credit Reports

The top three business credit reporting agencies, so it's imperative you monitor your company's credit files. Data gets collected by each agency from several sources and will have various information about your company.

Each business credit agency provides a means for your business's basic information to get updated by you. Contact the agency to make changes should you discover incorrect or outdated information.

An established business credit report allows you to get better interest rates, repayment terms in lines of credit and loans, and higher credit approvals.

Types of Available Credit

·        Term Loans

·        Corporate Credit Cards

·        Equipment Financing

·        Merchant Cash Advance

·        Lines of Credit

Make building your business credit a priority for your startup. Your business plan should have a credit-building strategy, which you need to keep an eye on regularly to ensure your credit scores remain positive.

How Kamber Enterprises Can Help Your Startup

At Kamber Enterprises, we understand that startups need funding to get their business off the ground and continue with growth, and sometimes funding is an option for those with bad credit. When banks don't want to provide funding, we will.

We specialize in helping startups secure capital to help them achieve all their financial goals. Our application process is quick and easy, and we provide funding fast, within 24 to 48 hours.

We provide a range of services. If you need assistance in making the right decision of funding for your startup, contact us at [email protected] or 888-373-8648. We are dedicated to helping you fund your startup when banks won't.