In your personal life, credit is something that naturally builds up overtime. You take out student loans. You buy a car that needs payments. You get your first credit card. You pay utilities and bills.
All of this (and more) can affect your credit, which in turn can affect your ability to buy a home or car, refinance debt, etc.
By the time personal credit really becomes a factor, you’ve probably had a good 20-30 years on this planet. For businesses, it’s a little different. Credit could become a big factor in your very first year of business.
So how exactly do you build business credit? And more importantly, how can you improve business credit?
Improve Your Own Credit
When you don’t have much business history or business credit to pull from, banks look at your personal credit instead. That means, if your personal credit is bad, you’re going to be facing some problems with getting financing and loans with interest rates for your business.
To improve your business credit possibilities, improve your personal credit. Some simple ways to do this are to pay your bills on time (or early), open a safe credit card and use it wisely, and pay off any outstanding debts.
Separate Business and Personal
Another great way to build tax credit is to separate your business finances and your personal finances. This means opening a separate account, incorporating your business (or setting up an LLC), and getting a tax identification number for your business.
This won’t immediately remove bad credit or magically improve everything, but it’s definitely a step in the right direction for those looking to build business credit.
Start Small (and Early)
In the beginning, you’ll likely be limited in the loans, business accounts, and credit you can get. So take what you can and use it responsibly. Use your credit to the max, but then pay it down immediately.
As your credit grows, the amount of credit should grow too. Continue to push the limits, but always make sure you can cover the amount your spending.
The further you get, the more caution you’ll need to show, but gradually, you’ll build up some great business credit.
Use an Accounting Professional
Accounting mistakes can leave you without cashflow. A lack of cashflow leaves you without the ability to pay bills, utilities, and loans, which in turn, damages your credit quickly. Don’t let this happen to you. Get professional help with your business’s finances.
At LWS Tax, we provide accounting help in Springfield, Ohio to businesses of all different industries and sizes. Contact us today, and get serious about your business credit.