What is business credit? Credit represents your business’s ability to borrow from authorized lenders. It can also provide protection to your business if met with expected costs.Establishing credit is important because creditors and suppliers use business credit reports to make lending and credit decisions. In order to take out a small business loan to startup or support your company, or apply for a business credit card, you must have good business credit.
The first few steps to creating business credit are:
* Incorporate or form an LLC to guarantee your company is represented as a separate business entity.
* Acquire a federal Employer/Tax ID Number (EIN).
* Open a business banking account(s) in the legal business name.
* Create a business address and phone line and make sure it is listed
Nowadays, business credit is a customer review for your company. For Example, if you need work done on your house and are looking to hire reliable companies to assist you, you can read reviews from people who have previously hired the company and were pleased or displeased with the quality of work provided. Your business creditability will convince customers, suppliers, and creditors that your business is worth investing time and money in the future.
Is credit really necessary for your business if you have good personal credit scores?
Absolutely! Business credit works similarly to your personal credit—it keeps track of your reliability with credit accounts. However, unlike personal credit, business credit scores are public, and are easily viewed and monitored by lenders, and customers. Failing to establish good business credit for your business can have similar consequences as mismanaging your personal credit.
With bad business credit, you could face higher interest rates, higher insurance premiums, and a bad reputation with suppliers.
Contact one of our Fort Worth Business Attorneys to assist you with your business legal needs. You can reach us at (817) 808-1718 or by email at contactus@mastellerlaw.com. Feel free to utilize our Contact Form to send us a message through our website as well.
