A Step By Step Guide To Building Credit For A Small Business

For a small business financing can mean the difference between life and death. There are many ways to secure financing for any sort of small business these days. One way, is to obtain a credit card. However, many new business owners are unaware of how to go about applying for a business credit. The owner can establish credit in the name of the business without affecting personal credit or he or she can sign for the business personally and assume all the liability. The purpose of this article is to explain to new business owners how they can obtain a company card offer for the first time.

The first thing any owner should do is establish a checking account under the name of the business. This can be done quite easily at your local bank. If you are a sole proprietor than you will have to provide your bank with your social security information for the account. However, if you are the owner of a a newly formed corporation you will need to obtain a federal tax identification number otherwise known as an EIN. Once you have established your checking account you will need to start making regular deposits and show that you have regular cash flow. This will begin to start establishing some credit for your company. Be careful not to over draw the account as well.

The next step you want to take to establish good credit is to also establish yourself with vendors in your industry. Set up credit accounts with local vendors such as office supply vendors as well as merchants who may provide your company with any raw materials. The bottom line is to start establishing a payment history with other businesses. Some of these merchants will then in turn report to the credit bureaus that will also set a credit precedence for your company. All business credit card providers will look at the three bureaus as well in order to make a determination as whether or not they are going to issue you that new business card.

Once you have established a credit rating than it is going to be time to start looking for a credit card provider who is going to best suit your needs. You will want to go over a variety of offers before you apply for any particular card. Examine features such as the interest rate and other fees associated with that card offer. You will also need to determine if you plan to carry a balance or not. Those who do not plan to carry a a balance will want to look at different rewards offers that are on the market. A small business can save money on a regular basis if the owner chooses the right rewards business card. Look for a reward offer that is going to suit your needs the best. If you plan to travel a lot than a business credit card that has good travel rewards program is probably your best bet.

Once you have chosen the right provider than you can start the application process. Prior to turning in the application, the owner will want to gather some important information. Just as you did with your bank account you will need information such as your social security number is you are sole proprietor or federal tax identification number if you are incorporated in any way. You will also want to get together your past tax returns with the IRS to prove your income. A profit and loss statement verified by a Certified Public Accountant will probably also be necessary. Once you have all this information gathered you can begin the normal application process of filling out requirements such as business address, name of owners, type of business, number of years established, as well as bank account and credit references. This is where building up a good history with local merchants is essential for obtaining a corporate card.

After the paper work has been turned in the issuer will look over your criteria and decide if they will grant you the credit that you are seeking. If your creditworthiness meets up to the issuers expectations than they will grant you credit line. If you are rejected, you will be told so in writing and will be given an opportunity to find out why you were rejected. Those who are rejected can apply in the future once they have improved their credit situation.