As a new business, securing credit is often the most important process. However, the catch 22 is that you often can’t secure a line of credit until you have credit history. This can put many small businesses in a delicate predicament. Not only will it be difficult to sign up for a business credit card, but it will also be hard to set up a loan or any other cash extension to pay for things like manufacturing, shipping, and covering overhead supplies. This is why you want to get creative and resourceful – you want to find many different solutions so that you can build credit and continue creating a successful business. Here are some easy and effective ways to build credit for your new business.
- Create a legitimate business structure. Before you apply for credit – or a credit card – you want to make sure your business is registered and legalized in your state. Some of thebest credit cards won’t be available to a business that doesn’t have an LLC, or limited liability corporation. You can usually visit your county registrar’s office for all the information you need to register your business.
- Apply for a secured credit card. It is also imperative to set up a secure credit card. For new businesses, a secured credit card can be applied for on the day you set up your company. In most cases, they won’t check your credit score or report, because the card will be approved upon some collateral basis. Usually, this collateral will come in the form of cash that will be held in an account and can be used to pay your bill at the end of the month.
- Make sure that your personal assets are safe and secure. It is also important to make sure your personal finances aren’t a mess, because it could affect your business. For instance, if you are trying to take a loan out or apply for a credit line and you are trying to use an asset as backup – like your home or car – it will be incredibly difficult if those items have late payments, or if you haven’t paid your mortgage. This is why focusing on tying up and polishing personal finances is so important.
- Take out a small loan. Another great way to establish some credit is to take out a small loan. This is another reason why tying up your personal finances is so important; you will usually need to put up some collateral to apply for the loan. You can use this loan to pay for manufacturing or overhead, but make sure you pay it back – you want to show a history of paying your bills on time.
- Always pay your bills on time and in full. Of course, you also want to pay your bills on time. If you don’t pay your bills, your credit score will drop and it will be difficult to build healthy credit. Whenever you get a bill – make sure to pay it immediately. In the end, you may want to set up an auto pay schedule, so that you never have to worry about it.