Insider Tips for Entrepreneurs to Maximize Credit
This guest blog post shares business success tips essential to entrepreneurs.
Insider Tips for Entrepreneurs to Maximize Credit
Contributed by: Debra Wilson
Credit makes the world go round. As an entrepreneur, you’re going to want to maximize your credit to help maximize your business’s spending potential. However, be cautious when utilizing your personal credit to help cover business expenses; this could take a toll on your personal credit score, preventing you from being eligible for future auto loans, credit cards and even a mortgage. Instead, focus on business credit.
Here are some insider tips for you to consider on how to maximize business credit.
Pay attention to paperwork
Susan Carter, an accountant from the real estate industry, urges small business owners to pay close attention when they file the initial paperwork for their business so they are able to utilize business credit, reports a press release issued by Right Now Marketing Group, LLC.
“If you don’t file your business name correctly, you could give someone else the ability to use your company’s name or take it from you once you have your business established,” Carter says.
Areas to pay extra attention include:
- Registration of business name
Determine how you would like to structure your business (partnership, LLC, corporation), and then register your business name with your state.
- Business address
Your business address must also be registered with your state; the address you register must be the same as what you plan to use when applying for credit.
- Employer Identification Number (EIN)
Once you’ve finished registering your business with your state, you will need to get your EIN from the IRS. This is the identification number you use when applying for business credit.
- Phone number
Most creditors will require you to have a telephone number for your business. You will likely want one that is separate from your personal or residential line. It is recommended to have it listed with the national 411 directory under the same address and name that you registered with your state. This is how many creditors will ensure that the information on your credit application is legitimate.
Build your credit
Once you have established your business, it’s time to build your credit. According to AllBusiness.com, a D&B company, small business owners can utilizing the following three tactics to improve their business credit score:
- Focus on your combination
Creditors want to see that your business is able to handle a mix of credit, including credit cards and installment loans. When you obtain credit, the creditors need to report the accounts to the national credit bureaus for you to obtain a credit score, so make sure to ask the creditor if they will be reporting.
- Pay in advance
You’ve probably heard before about the value of paying your credit accounts on time. Well, with business credit, you can get even better ratings if you pay your accounts in advance.
- Open a business loan
Other creditors place a high value on bank loans, as they can be more difficult to obtain. A great tactic is to get a secured business loan. Banks are likely to report to the credit bureaus, so it will show up on your report. And secured loans are much easier to obtain, so it will increase your qualification potential.
Don’t spend more than your business can afford
Just as with your personal life, you will want to watch how much you purchase with your business credit cards. Credit is a fantastic tool to help your business, especially when it’s starting out. But it can be a slippery slope when you start relying on credit for all of your purchases. In fact, the probability of failure rises by 2.2 percent for each $1,000 in credit card debt, was the findings of a Kauffman Firm survey.
Watch your credit card rates
Small businesses don’t have the same protections as consumers, as they are not covered by the recent Credit CARD Act. This means you should keep a close watch on your credit card rates. If your bank increases your rates, contact them to see if you can negotiate a lower rate. If your bank doesn’t budge with the rate, watch how much of the balance you carry over each month. An increased rate can equal thousands of dollars more in interest over the life of the balance.
About the Author:
Debra contributed this article. Debra is a social media advocate at the business credit card comparison website, www.creditdonkey.com
Money makes the world go round. Credit can act like money or stop the world in it's tracks for those who are careless and without a plan. Thank you Debra for the article and great business success tips about credit.
Log-in