In a statement, the US government announced that, “Americans are applying to start new businesses at a record rate,” and that this is, “up about 30 percent compared to before the pandemic.”
This statement highlights that, despite the tremendous trials of the pandemic, citizens are still pushing to become leaders, entrepreneurs, and business owners. This fighting spirit and determination to succeed are embedded into the framework of the workforce.
With so many citizens beginning to open new businesses, it is important for them to do critical research into what it takes to become a viable source for profit. There are numerous things for new business owners to consider, and one of them is business credit.
Business credit is important, as the better, your business credit is, the more likely your business is to receive loans, investment, and debt safety.
5 Ways to Quickly Build Business Credit
The Really Useful Information Company (TRUiC) has compiled a list of necessary procedures to follow on how to build business credit fast. Similarly, TRUiC has a wealth of valuable resources regarding business formation.
1. Form an LLC
When starting a business, potential owners and founders are faced with the difficult decision of choosing how to structure their business. In the US, there are four main business structures for owners to choose from: Limited Liability, sole proprietorship, partnership, and corporation. Each structure has its own sets of benefits, downsides, tax implications, and liability.
Limited Liability Companies, or LLCs, are a popular choice for business owners because of the way that tax and liability are structured within their frameworks. As a legal entity, LLCs offer liability protection which protects business owners.
2. Acquire a Business Bank Account
To build business credit, it is important for new business owners to have a separate bank account for their business. When applying for a loan, creditors will frequently use business bank accounts to ensure that a business is eligible. Similarly, this is also a way of making sure that liability is protected.
By having a separate business account, lenders are also able to have full sight of the business’s financial circumstances.
3. Use a Business Credit Card
Once a business has opened its business bank account, the next step to consider is using a business credit card, and then paying that credit card off. This will help the business establish a historical record of good credit and repayment. It is important to use the credit card regularly and to choose a credit card that works for the business type and structure.
It must be noted that how long the business has been in operation, and the revenue that the business makes, are taken into account when determining how much credit a business can be approved for.
Businesses can build credit faster by paying their credit cards off early and regularly.
- Consider Reading: How Your Credit Score Affects Home Loans
4. Establish Working Relationships with Vendors
Many new businesses overlook the importance of establishing great working relationships with their vendors. Business owners can negotiate contracts for services and products. In turn, businesses can build credit by paying vendors on time, or earlier if possible.
5. Apply for a Business Loan
A final and crucial step to building business credit quickly is to apply for a business loan. In the same way as paying vendors and credit cards off, loans are an effective way to illustrate a good financial record and the ability to pay quickly and regularly.
- Consider Reading: Designing The Financial Structure For Your Company
Business credit is an incredibly important facet of business operations for new businesses to grapple with. Taking the steps to build business credit quickly can help businesses obtain loans, investment, and security. Platforms like TRUiC are useful for finding comprehensive and resourceful information on business structures.