The ability [of a customer or business] to obtain goods or services before payment, based on the trust that payment will be made in the future. “I’ve got unlimited credit!’
When you start your new business, you might use your personal credit for operations. [Need help polishing your personal credit before you start your business? Click here for steps to take and here to order your personal credit report.]
But, soon, it is imperative that you establish credit in the name of your business. Why is this important? Simply stated:
The first step in establishing business credit is to build a credit file for your business. Here’s how:
1. secure a tax identification (ID) number from the Internal Revenue Service.
2. obtain a unique identification number for your firm, called a Data Universal Numbering System (DUNS) number, through http://www.dnb.com.
3. once you have the DUNS number, become a subscriber of a reporting service by submitting information on your business to one of the three major national credit reporting agencies (TransUnion, Experian Business, and Equifax Business). Get started here.
When you subscribe, your information will generate a credit report. It is similar to your personal credit report, but also contains information provided by banks, lenders, investors, landlords, other businesses, and government agencies. A business credit report contains an analysis of credit worthiness, insurance underwriting, employment, certain licenses, continued credit terms, and business needs.
→ TIP: To ensure the most favorable credit rating, include the strongest or most well-established line-of-credit accounts in your registration information. The reporting agency will contact the creditors you list for the most current information.
Here’s an unexpected benefit of credit reporting: being listed with the business reporting service helps customers find your company through internet searches that link your company’s name to the name or key words in your company’s credit report.
Like a personal credit report, a business credit report impacts both short and long term capacity for growth. Start building yours today.
Want more? Click here for a Small Business Administration guide — Credit Reporting for a Small Business.