One of the most important things your small business can have is credit. You need access to funds for operating expenses and equipment, and business credit, including trade credit and business credit cards, will help you build a good credit profile.
The best way to start your business credit profile is to get a business credit card. If you have not business credit at all, you may need to start with a trade credit card, such as a card from an office supply store or computer vendor. Use the card carefully, pay the bill on time, and keep the balance low.
Use your business credit card responsibly and apply for more business credit every few months. Ask your vendors to extend terms to your business after you’ve been with them for a while. Look into getting another business credit card. Lease some equipment, or set up a line of credit with a supplier.
You will not have excellent business credit immediately; it takes time and effort to build a positive business credit profile. It’s no different than building your personal credit cards. You must take the time and make the effort to develop credit responsibly.
If you do not currently have a business credit card and you need to get one, make sure that you have a business bank account and phone number, and that you are an established business. You may need to prove that you’re a going concern. Incorporation is not necessary but can be helpful.
The main thing is, you will have to start from scratch in building your credit record. You may have to pay suppliers by credit card for three or four months before you can establish credit with them. While this seems like a lot of trouble, going to this trouble now will make your business credit look much better down the road.
Be careful, when establishing accounts, to only establish what you need, where you need it. And watch your spending. This is your business, and you need to keep your business credit profile very good. It can be difficult sometimes to avoid that new “thing,” but you absolutely have to if you’re going to establish business credit.
It may help to make a written plan of how you intend to build your credit. Think out how you can get to where you want to be, and what you want to accomplish and what you need to purchase during that plan.
Consider building business credit just another part of your job as a business owner. It’s not always fun, but taking the time to do it well will make your business grow faster, and will put you in a good position to take advantage of future opportunities as they arise.
Credit gives you flexibility, and you absolutely need to be flexible to be ready for every challenge you will face as a business owner. Building credit is not only a good idea; it’s practically a necessity if you intend to create and maintain a thriving business.