BUILD BUSINESS CREDIT
ESTABLISHING BUSINESS CREDIT
Establishing and maintaining good business credit is important to run a successful business, as it aids in maximizing cash flow and minimizing the possibility of being flagged as high risk. Please note that it can take three to six months to build business credit.
Business credit is linked to a company’s EIN (Employer Identification Number) and enables it to qualify for business loans, open bank accounts and credit lines, and obtain credit cards and vehicle financing. A company cannot open a bank account or apply for business credit without an EIN. When applying for business credit, be sure to leave the SSN blank. This will prevent your personal credit from being negatively impacted in the event of a default on a business credit account.
Although financial institutions will evaluate a company for business credit based upon the individuals associated with its public record and their ability to pay outstanding loans and lines of credit, there are many other factors that may affect a bank’s decision to extend business credit. Some of these, such as rent district, per capita income, and demographic makeup of the area surrounding the company’s office location, may seem discriminatory, and can negatively impact the ability to obtain business credit. Therefore, to increase your chance of being granted business credit, avoid the use of PO Boxes, UPS stores, and mail drops for the company address, as these may be considered high risk. Residential addresses can also negatively affect building business credit. Instead, opt for a “brick and mortar” company address.
Other factors financial institutions consider when evaluating a company for business credit are strictly business-related. Examples of these are listed below.