A good credit score for your small business is just as important as a good personal credit score. Achieving a good credit score for your small business will allow you to obtain capital to grow your business, determine whether suppliers will extend good credit terms to you, and will affect your business insurance premiums as well.
Although most banks extending a line of credit to your business will require a personal guaranty, it is important to maintain good business credit as well. In fact, some credit reporting agencies such as Experian actually have separate small business credit reports for review.
A small business may establish good business credit by obtaining a credit card or a bank line of credit under its own tax identification number.
Establish business credit with vendors and companies that report their trade information such as your history of payments, the frequency of payments, and whether they are on time, late or in default.
They also report:
- The number of trade experiences with your company
- Outstanding balances
- Whether your payments are on time, delayed or in default
- Whether credit has been extended
- Whether public records such as lawsuits, tax liens, violations, etc. exist on your business
How to establish business credit:
- Incorporate a company to ensure that your company is seen as a separate business entity
- Obtain a separate Federal Employer Identification Number
- Open separate business bank accounts in your corporate name
- Establish dedicated business phone lines, mailing addresses, emails, etc.
Finally, you should monitor your business credit to ensure that your banks, creditors and vendors are reporting your accurate credit and payment history, and learn how to correct negative information on your business credit report.
As always, please feel free to contact me for a free consultation regarding your specific financial circumstances.
For more Bankruptcy facts and articles, please see my website at www.allenkolber.com.
I have been practicing Bankruptcy law, Business law and Litigation for over 25 years.
The Law Offices of Allen A. Kolber, Esq. is a full service law firm that provides quality representation in the following areas:
- Bankruptcy Law and Litigation
- Foreclosure Defense
- Loan Modifications/Short Sales
- Business and Corporate Law and Litigation