175: Good Credit Has Benefits Whether You Are Starting A Business Or Side Hustle, A Solopreneur, Entrepreneur, Mompreneur, Freelancer, Bookkeeper, Virtual Assistant, Business Owner, Or Self-Employed
175: Good Credit Has Benefits Whether You Are Starting A Business Or Side Hustle, A Solopreneur, Entrepreneur, Mompreneur, Freelancer, Bookkeeper, Virtual Assistant, Business Owner, Or Self-Employed
Obtaining credit for a business is critical so that they can borrow additional funds if needed. Establishing and building business credit is essential for any business owner, whether they are looking to expand and grow their company with financing or even if they don’t intend on utilizing any financing. By establishing a good credit history with lenders, you can access the capital you need to finance your operations, purchase inventory and supplies, and expand your business. There are several things you can do to build strong business credit, but before you can establish any business credit, you need to make sure your business is structured properly. In today's podcast episode, I am outlining not only the very first step you need to take so that you can start building your credit profile but also a few other important steps you need to take to build credit for your business. Establishing and building credit for your business is something you will build over time, and it doesn’t matter if you are starting a business or side hustle, you’re a self-employed individual, a solopreneur, entrepreneur, mompreneur, freelancer, small business owner, a remote, virtual, online, or in-house bookkeeper or accountant, a virtual assistant or VA, or other professional good credit has many positive impacts for your business. If you need to establish or build credit in your business, you'll want to implement these steps early in your business. Building credit for your business takes time, and the sooner you start, the more time you'll have to generate transactions that build your credit. It doesn't matter if you are using a computerized software system like QuickBooks, Xero, Wave, or FreshBooks for your business finances or if you are doing your bookkeeping manually with an Excel spreadsheet or even a Google document, this episode will provide steps for you to ensure your business is building business credit…
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Show Notes:
Obtaining credit for a business is critical so that they can borrow additional funds if needed. Establishing and building business credit is essential for any business owner, whether they are looking to expand and grow their company with financing or even if they don’t intend on utilizing any financing. By establishing a good credit history with lenders, you can access the capital you need to finance your operations, purchase inventory and supplies, and expand your business. There are several things you can do to build strong business credit, but before you can establish any business credit, you need to make sure your business is structured properly. In today's podcast episode, I am outlining not only the very first step you need to take so that you can start building your credit profile but also a few other important steps you need to take to build credit for your business. Establishing and building credit for your business is something you will build over time, and it doesn’t matter if you are starting a business or side hustle, you’re a self-employed individual, a solopreneur, entrepreneur, mompreneur, freelancer, small business owner, a remote, virtual, online, or in-house bookkeeper or accountant, a virtual assistant or VA, or other professional good credit has many positive impacts for your business. If you need to establish or build credit in your business, you'll want to implement these steps early in your business. Building credit for your business takes time, and the sooner you start, the more time you'll have to generate transactions that build your credit. It doesn't matter if you are using a computerized software system like QuickBooks, Xero, Wave, or FreshBooks for your business finances or if you are doing your bookkeeping manually with an Excel spreadsheet or even a Google document, this episode will provide steps for you to ensure your business is building business credit…
Welcome Back…Having good personal credit can help you get lower insurance premiums, lower interest rates, and many other benefits. Very similar to having good personal credit, when your business has established good credit, you will start to see some of these benefits in your business as well. Having benefits like these to fall back on when needed in your business is important. Establishing and building your business credit is similar to how you can improve your personal credit, but there are some very distinctive steps you need to make so that you are actually improving your business credit.
First, you need to make sure that your business is set up separately from you personally. If you don’t take this first step, you will continue to build credit on yourself personally rather than for the business. This means that you need to create a separate entity for your business. If your business is operating as a sole proprietorship, you will continue to build personal credit rather than business credit since the sole proprietorship is essentially you running the business, and the business taxes and business credit will be tied to you as an individual and will reflect on your personal credit history.
You would need to incorporate your business or form an LLC so that you have a business that is legally separate from you as the owner.
When you incorporate or form an LLC, you will obtain an EIN number. This EIN number is what differentiates your business as a separate entity. You will use this number when you file your tax return, as well as many other instances in your business. As long as your business is active and there are no serious errors on your tax filings, having a history of filing taxes on time will be one of the key things lenders look at when establishing business credit for your company.
Next, you’ll want to open a business bank account in the legal business name. You will use this account to pay for your business transactions. It is important that you use this account for business purposes only. Do not commingle your business and personal funds in this account.
Whenever possible, have the phone number that you set up for your business in your business name. Make sure to use this business number whenever referencing your business rather than a personal phone number.
Now that we’ve gone over what you need to be able to establish credit under your business, let’s talk about how you can build your business credit. You need to make sure that whenever you are using a vendor that you want to use to build credit for your business that the vendor is reporting to one of the major credit bureaus. This is why one of the most popular ways for businesses to build credit is to apply for a business credit card. Credit card companies will usually report your credit to one of the major credit bureaus. Having at least one business credit card that is in the business name can be beneficial for more than just building credit, but you will need to make sure that you are making your payments on time and not letting any late payments negatively impact your credit.
Whenever you are collaborating with additional vendors, find out if they are reporting your credit to the major credit bureaus as well. These vendors may be utility companies or even vendors you are utilizing as a supplier. When negotiating terms with your vendors, you will again want to make sure you are paying these vendors on time or even a little early. When you pay your vendors or your credit card payments early, you can actually better your score that is based on your payment history. Even if you are having trouble making your payments, try to avoid skipping payments. Pay at least the minimums, work with your vendors to get back on track, and avoid paying any late fees whenever possible. Skipping business payments is a sure way to put a damper on your business credit.
Securing a line of credit with your vendors or financial institution or borrowing from a lender that reports to the major credit bureaus is another way you can help build your business credit. Banks will normally report to the major credit bureaus, but you can always ask prior to taking out the line of credit to make sure so that your credit continues to build. Having this additional cash from a line of credit available to you in the event that your cash flow is not enough to sustain your business is another way you can build your credit as well as ensure your business is set up to run efficiently during a hardship.
Now that you have followed the steps to establish and build your business credit, you will want to make sure you are monitoring your credit as well. It's important to monitor your business credit regularly so you can know exactly how your business is doing when applying for business financing. This will help you establish a clear picture of your business financial identity and give you an accurate portrayal of what potential lenders see when they look at your business credit. If there are any major changes in the way your business finances appear, especially if you have had problems with late payments or missed deadlines, this may be a sign that something is going wrong with your business and needs to be addressed as soon as possible to avoid hurting your business credit. It is also important to watch for fraudulent activity. By monitoring your credit regularly, you can quickly begin to fix any fraudulent activity or flaws you may be seeing in your credit reports.
The importance of business credit cannot be overstated. Lenders will typically look at business credit reports before they even lend to a business owner for some quick information on how well the company has done financially in the past and what kind of history it has with its creditors. With that said, establishing business credit can be just as important for businesses with no intentions of taking out any lines of business financing because having good business credit opens up many opportunities and benefits for the business.
Establishing credit is a crucial step in starting and growing your own business. If you are new to the world of entrepreneurship, it can be hard to know where to begin. By following these steps, you will have established business accounts and lines of credit with banks and vendors, which are important for all businesses and will set your business up for successful financing opportunities in the future.
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Like many of the clients I’ve worked with, you’ll go from not knowing how to get through all the stressful situations or being unprepared to being totally in control of exactly what you are choosing to get done at the time you want to have it accomplished by, all while knowing you are doing enough and you’re able to enjoy your business and your personal life. I help clients just like you with strategy, mentorship, and coaching. When you work with me, you’ll show up much more differently than you do today, and, after all, this is what you ultimately want in your life, right? You can be stress-free in both your professional and personal life. Come join me. When I work with clients throughout the year, they are able to reduce their stress and overwhelm, understand how to master their small business finances, develop solutions to grow their bottom line, and create a work-life balance they truly enjoy. I encourage you to take the next step by signing up for a free consultation where I’m going to teach you the first step in my process so that you can eliminate stress, overwhelm, or overworking in your professional or personal life while you continue to get done what matters so that you can live your life with joy, purpose and a more fulfilled life. Feel free to reach out to me with any questions you have; I’d love to help you on this journey. You can schedule your free consultation or sign up for a coaching session today at www.FinancialAdventure.com. As a Certified Public Accountant and Certified Life Coach, I can help you set goals and develop a plan that will allow you to lead a happier and more sustainable life in your business, career, or your personal life. 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I’m looking forward to meeting with you soon and digging deeper to see where you currently are in your business or career and start creating actionable steps so that you can reach your vision and goals for the future, not only in your business or career but also in your personal life. I’m ready to work with you, see all of your successes, and watch you thrive in your business or career while creating your best work-life balance. I’ll post links to this and other valuable resources for business owners and accountants where you are listening to this podcast.
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