Building business credit usually involves setting up a business, acquiring all necessary legal and tax documents, and maintaining a good credit history. You also need to keep accurate books of accounts.The lenders normally access this information when approving business credit.
- Set up a legal business entity
For a business to access credit facilities, it needs to be separate and distinct from its owners. You need to register the business at the registrar of companies offices. Ensure that you have a trading license from local authorities and any other license that may be required for the type of work the business is involved in.
- Get tax certificates
Every business needs to have a tax certificate. In the United States, businesses acquire a tax ID. The tax information is needed by your bank and credit bureaus. Furthermore, lenders use this number to check the creditworthiness of your business.
- Open a business bank account
Your business needs to have at least one bank account. There are time limits within which the business account must be active to access a business loan. This is usually one to two years.
- Maintain a good credit history
You need to maintain a positive cash flow statement that shows ability to take a business debt. Moreover, you need to have a good personal credit rating. Most creditors also check the personal credit rating of shareholders who own substantial shares in the company.
- Start applying for credit
You may start applying for business credit after satisfying the above requirement. However, only apply for credit when the business actually needs it. You may start with suppliers before approaching financial institutions.