Credit Finance

If you currently have a business or you are considering starting a business, establishing business credit is a good idea. According to the National Association of Credit Management (NACM) small business owners should take steps to establish credit in the name of their business as a way to preserve cash flow for necessary business operations, purchases, and rental payments. Here are a few basics to begin building business credit.

Separate Your Business Credit from Personal Credit

Business credit can and should be established separate from personal credit. When business owners use their personal credit to obtain business credit, they run the risk of lowering their personal credit scores. The business owner also risks being personally responsible for business liabilities. If you file bankruptcy and your personal and business credit are one in the same, you stand to lose everything. Business credit protects your personal assets.

No Personal Guarantees

The most important element to establishing business credit is finding lending institutions, credit card issuers and vendors that will establish business credit without you giving a personal guarantee. A personal guarantee involves using your personal credit information to guarantee repayment of the debt incurred by the business. In other words, you are obligating yourself to be 100% responsible for the business debt. It may be your intention to fully repay any debt incurred by the business; however, obligating your personal and business assets to repaying business debts can lead to financial ruin if any business setbacks occur.

Business Structure

Doing business as a sole proprietor will not allow you to distinguish your business credit from your personal credit. As a sole proprietor you may be “doing business as”; however, you are not a separate business entity. In order to establish business credit without a personal guarantee you must structure your business as a separate legal entity such as a corporation or limited liability company. Even if you have been doing business as a sole proprietor for years, you can restructure your business into a separate legal entity. Besides, it is a better choice to set your business up as an entity separate and apart from you. Your business could get sued and if all of your assets are tied together, financial ruin may be lurking in the background. Having a separate entity protects your personal assets.

Tax Identification Numbers

Your business entity must have an Employer Identification Number (EIN) also known as a Federal Tax Identification Number (Tax ID). The EIN is your permanent number and can be used immediately for most of your business needs, including opening a bank account, applying for business licenses and establishing a business credit file. Never use your social security number. It may also be necessary to establish a State tax identification number. For the federal tax identification number you can apply online at www.irs.gov. The application process is fairly simple and you can receive the EIN immediately.

Business Checking Account

Your business entity should have at least one bank account, in the name of the business, that can be used as a bank reference. The older the bank account, the better. Having a business checking account helps in establishing your business identity and reputation. Banking relationships are still important in the business world. Building a strong relationship with your bank can be of assistance when you begin to seek business financing.

Get a Business License

You must always register your business and obtain a business license in the State, County or City where you conduct business. For some reason, this is not always done by businesses. It should be at the top of your “to do” list. Always register your business in the jurisdiction where you conduct business.

For a step-by-step process for building business credit please visit: www.rebuildcreditscores.com/Business_Credit.html



By: Lisa Phillips

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Are you a business owner or do you have plans of venturing into business? If yes, then this article is for you. It doesn’t matter whether your business is old or new, or what type of business you’re into- if you’re in the business industry, you should take advantage of the benefits of business credit cards. Why is a business credit card a must for every business owner?

Track Your Business Expenses Efficiently

Primarily, business credit cards help a business manage its finances more efficiently. For instance, tracking business expenses can prove to be a challenge. Keeping inventory of the costs and making sure that not a single cent is missed involves a lot of work. However, this task is made much simpler with the help of business credit cards.

How Do Business Credit Cards Help You To Manage Your Business?

All purchases that are charged to your business credit cards are automatically included in your account history. Most business credit card companies provide an online account access option to its holders so you can check on the status of your business credit card account anytime. Monthly billing statements will also be sent regularly along with quarterly and yearly summaries of your account. Account summaries are indispensable tools when doing your accounting and bookkeeping tasks. These summaries are also wonderful references when filing your taxes. By checking into your account summary, you can easily identify the items or purchases that are qualified for tax exemptions.

Another great feature of business credit cards is the option to distribute extension credit cards to your employees. This way, you can give out credit cards to your selected employees which they can use for official business expenses. Because all expenses charged to these extension credit cards will also be listed in your account statement, you can be sure that you can keep track of your employees’ spending habits and that the cards will be used accordingly.

The use of business credit cards also enable a business establish a separate business credit history for the company. By using your business credit card, keeping within your given credit limit, and staying true to your payment obligations, you can build an excellent credit history for your company more easily. Of course, don’t forget that in order for your business credit to be recorded, you need to register with a business credit reporting agency like D&B and Experian.

Furthermore, business credit cards help you separate your business funds from your personal money. This is a crucial factor especially as your business begins to grow and as expenses start to multiply and mount up. A separate business account helps you see exactly how much your budget is and thus, will enable you to make business decisions more effectively.

Use Your Business Credit Card with Care

Caution must also be taken when using business credit cards. For instance, some business owners carelessly use their business credit cards even for their personal purchases. Doing so can easily put you into credit card debt and can cause problems to your business. Therefore, make sure that you’ll use your business credit card strictly for business expenses only. Don’t use it when you’re at the mall or buying your groceries or when dining out with your family. Remember, your business credit card should be a tool to help you with your business and must never be used for personal whims.



By: Pamela Williams

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Every business owner knows the importance of establishing and building business credit. Without a separate credit history, a business would find it more difficult to get approved for loans or new accounts. On the contrary, a solid and outstanding business credit not only ensures fast approval but also encourages great deals from potential lenders.

Why should you start establishing your business credit now? Establishing your credit history from the time you’ve launched your business is definitely an advantage. The older your business credit is, the more confident lenders would be on your ability to keep up with your payment obligations. Why is this important?

Sooner or later, as your business grows and expands, you’ll need to apply for new loans and other business financing options. As we’ve said, the more impressive your business credit history is, the better your chances are of getting the best of what lenders has to offer.

In addition, having a corporate credit protects your personal credit history from risks. If you fail to meet your deadline of payment on your business credit card, only your business credit will be affected and your personal credit history won’t have to suffer. Let’s discuss the requirements and information you’ll need to prepare before you can start building your business credit.

Legal entity. First of all, you need to clearly define the type of your business. To qualify for corporate credit, your business should be a corporation or an LLC (Limited Liability Corporation).

Physical Address. A legitimate business must have a physical address and telephone number. These two important contact details confirm that your business is really existent and not just a name.

Investor. Who is funding your business? Whether you have sought help or financial assistance from a lending company or a private investor, you must provide this information when applying for business credit.

Licensing. You should be able to present proofs that your business is already registered and has duly met all permits and business licensing requirements of your local State.

Personal credit. Since you don’t have a business credit yet, your personal credit would be used instead when you apply for a loan, a business line credit or a business credit card. Obviously, an excellent personal credit score increases your chances of getting approved and getting the best deals.

Credit Bureau. Dun & Bradstreet and Experian are the two known business credit reporting agency in the US. You can apply or register your company with these credit bureaus by filling out and submitting their online business credit application. Completion of the process can take up to 30 days, but once completed, you can be assured that all your dealings with your lenders and business partners will be reflected in your business credit report.

Paydex Score. Your Paydex Score is equivalent to your FICO Score. The Paydex score is used to calculate a business’s credit history. To build a high Paydex score, you need to prove your worthiness as a borrower. After registering your business with the credit bureau, getting a loan or a credit card and keeping up with your payments is the best way to build up your business credit.



By: Pamela Williams

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