Building Business Credit Without a Personal Guarantee: 19 Steps to success
As a business owner, you may be aware that having good credit is crucial for your business’s success. However, there’s a common misconception that personal credit and business credit are the same. Many business owners make the mistake of using their personal credit to fund their business expenses, which can lead to financial setbacks in the long run.
To avoid this, many business owners are embracing the idea of separating personal credit from business credit. One way to do this is by building corporate credit without using a personal guarantee. With that said, here are 19 steps to building business credit without a personal guarantee:
1. Incorporate your business: One of the first steps to building business credit is to incorporate your business. By doing so, you’re creating a legal separation between you and your business.
2. Obtain an EIN number: An Employer Identification Number (EIN) is a unique nine-digit number that identifies your business for tax purposes. You can obtain one for free from the IRS website.
3. Open a business bank account: Open a separate business bank account to keep your personal finances separate from your business finances.
4. Establish a business address and phone number: Having a business address and phone number will make it easier for lenders to verify your business’s legitimacy.
5. Register with Dun & Bradstreet: Dun & Bradstreet is a business credit reporting agency that tracks businesses’ credit profiles.
6. Apply for a D-U-N-S number: D-U-N-S number is a unique nine-digit number assigned by Dun & Bradstreet to identify your business.
7. Build trade lines: Build trade lines by opening accounts with vendors who report to credit bureaus.
8. Pay bills on time: On-time payment is one of the essential factors that affect your business credit score.
9. Monitor your business credit score: Monitoring your business credit score will help you detect errors and unauthorized inquiries.
10. Establish a credit history: A credit history will help lenders determine your creditworthiness.
11. Use a business credit card: A business credit card can help you establish credit and keep your personal and business expenses separate.
12. Apply for a business line of credit: A business line of credit can provide you with the funds you need for short-term expenses.
13. Don’t exceed your credit limit: Avoid going over your credit limits, as this can negatively affect your credit score.
14. Use different credit types: Having different types of credit, such as a business loan or a credit card, can boost your credit score.
15. Keep your credit utilization low: Keeping your credit utilization low demonstrates that you’re capable of managing your credit responsibly.
16. Build a relationship with your vendors: Building a relationship with your vendors can help you establish trust and increase your chances of getting better payment terms and credit limits.
17. Partner with other businesses: Partnering with other businesses can help you gain traction and build credibility.
18. Apply for a small business loan: A small business loan can provide you with the capital you need to grow your business while also helping you build your credit.
19. Be patient: Building business credit takes time, so be patient and consistent in implementing these steps.
Building business credit without a personal guarantee is possible if you follow these 19 steps. It may be challenging at first, but it will pay off in the long run when you have a stable credit score that is separate from your personal credit.