Can I Just Use My Personal Credit?
As a small business owner, both personal and business credit are important. While.many financial institutions will begin by looking at your business credit, it is not uncommon for lenders to perform a credit check on a small business owner’s personal credit. Have less than perfect credit? No worries, the good news is that you can start to build business credit even if your personal credit isn’t very healthy.
3 Easy Steps to Get Started
Access to a line of credit can be critical as your business is in it’s infancy stages. Whether you are operating as a corporation or a limited liability company, your business is able to establish credit as an entity. This line is credit is separate from your personal credit as an individual.
1.) Select the Correct Business Structure
Registered businesses – limited liability companies (LLCs), partnerships (LLPs), and corporations all have the ability to become recognized as separate legal entities. If you haven’t yet, you will want to register your business with your state. By registering and filing your business with your state, you are taking the first step in officially forming your business as an entity.
It is important to note that sole proprietorships are not separate legal entities. By definition, a sole proprietorship is the action of an individual operating the business as their self. For this reason, there is no distinction between personal assets and business assets; you are operating as the same entity.
2.) Obtain an EIN
Introduction to EINS
An Employer Identification Number (EIN) is a unique number assigned to your business by the Internal Revenue Service (IRS). Similar to a Social Security Number for individuals, it is an exclusive number that identifies you for tax purposes. Alike SSNs for individuals, an EIN is also used to associate credit scores with businesses.
Want to learn more about EINs?
Check out this article: What Is an EIN and Does Your Business Need One?
3.) Open a Business Banking Account
Introduction to Business Banking Accounts
Once you have officially formed your business and obtained an EIN, you can apply to open a business banking account. A business checking account can be used to help form a relationship with a financial institution. While a checking account won’t necessarily build credit, it will help you build a relationship with a bank that may be able to offer you a line of credit in the future.
Want to learn more about Business Checking?
Check out this article : Do I Need a Business Checking Account?