Last Updated on July 28, 2023 by Mike
One thing small businesses need to consider is credit. As a small business owner, you will more than likely need to make larger purchases from time to time that require the use of credit. Whether it’s a new piece of office equipment or the money to get your business off the ground, business credit is essential. The following is everything you need to know about how to build a credit history for your small business.
Open a Separate Checking Account
The first thing small business owners want to do is open a business checking account. Having separate accounts makes it much easier to keep business and personal expenses separated. While you don’t necessarily have to open a business account, you still want to make sure you have a separate account.
Obtain Credit for Your Business
There are a number of ways to obtain credit for your business. For example, many small businesses use credit cards to finance small purchases. However, you also have the option of taking out a small business loan. Both credit options can help you build a credit history for your small business.
Charge Small Purchases
As with any type of credit history, you want to prove that you’re responsible. One way to do this is to charge small expenses and pay them off when the bill arrives. Do this every few months and you’ll begin to build a strong credit history.
Pay Bills on Time
You absolutely must pay your bills on time in order to build a positive credit history for your business. There are a number of ways you can do this. Whether it means making auto-payments or setting reminders on an online calendar, you need to make sure you remember to make your payments on time or risk hurting your credit history.
Plan Before You Spend
Last, but not least, before you even think of how to finance a large purchase for your business, consider how you’ll pay the monthly payments and what you can afford to pay. For example, let’s say you need to purchase a new computer for your graphic design business and the computer costs $5000. Sit down and consider how much you want to pay per month, the best way to finance the purchase so that you pay the least amount of interest, and then start looking at your options. This allows you to make an informed decision that will not bankrupt your business.
As a small business owner, you will come across an expense from time to time that needs funding through credit. This means you must make sure that your business has a credit history by opening a separate checking account, obtaining a credit card in your business name, or taking on a small business loan as well as paying your bills on time.
About the Author: Dane Lutton runs a small business consulting firm from a virtual office space in NYC. He spends a great deal of time talking to small business owners about finances and credit and enjoys watching small businesses grow.
