Just like with personal credit scores, small business owners in Texas will have an easier time securing financing when their business has a strong credit score. Establishing and building business credit is a lot like managing personal credit. Companies need to make payments on borrowed funds in a timely manner and keep a close eye on their business credit report.
Getting established
In order to establish a business credit score, the owner will need to register a limited liability company (LLC). They will also need to get a tax identification number from the IRS. Businesses file taxes and handle business transactions using the tax identification number.
Then, the business will need to open a bank account in the business’s name. This helps to keep the business separate from the owner’s finances. The next step is applying for credit in the name of the business. This can be in the form of business credit cards, business loans or even trade credit from vendors.
Building credit
Once a business has established some credit accounts, the focus switches to the long game of building credit over time. If the business has credit with vendors, they should ask them to report the transactions to the credit bureaus. This will help build up a history of on-time payments and establish that the business is trustworthy.
It’s essential that a business is always making payments on time. As with personal credit, failing to make timely payments will lower a business credit score.
Owners should make it a practice to check their business credit reports regularly. Unfortunately, it will cost money to check this. It is worth it so owners can find any inaccuracies in these reports and correct them as soon as possible. Checking the report also lets business owners see how the business’s credit is doing. This way, they can evaluate what actions might further improve their scores.
Building a good business credit score may take a long time. On-time payments and reducing balances on credit cards and loans can positively impact your score.