5 Best Online Resources Entrepreneurs Can Use to Build Business Credit
The author is a freelance journalist and public relations specialist for Google News. He can be reached at [email protected] — Ed.
Small businesses are the backbone of the US economy, accounting for 46.8% of its economic activity. the US Small Business Administration showed in their report that 32.5 million small businesses in the United States employ 46.8% of the workforce. Regardless of industry, Bureau of Labor Statistics findings show that two-thirds of them survive to two years and only one-third survive past ten years.
Unfortunately, one of the main reasons for failure for 82% of businesses is cash flow problems. Credit scores are essential for a business seeking financing and play an important role in the approval of credit applications.
The sooner you can build trade credit for your business, the sooner you can get a loan from lenders and establish cash flow.
Online resources to help build business credit
There are several steps to establishing business credit. To learn how to create business credit using all the invaluable online resources at your disposal.
1. Name your business
Your business name is vital to your creditors and the credit bureaus. Choosing an appropriate business name will make it easier to market and gain recognition from your customers. You will also use the name to register your legal entity and apply for an EIN and bank account.
Choosing a business name is much easier when you use a name generator. You can do a business name search online to make sure it is unique and not being used by any other business.
Once you have decided on your business name, do an online domain name availability check.
2. Form a legal entity
Corporations are more likely to get a loan from a bank because the business assets are protected. Whether you choose to form an LLC or a corporation, your business will benefit from limited liability protection that protects the lender’s risk against any default or lawsuit it may face.
Several online resources make setting up an LLC easy and affordable. There are only six steps to registering your business with the state. An LLC formation service can also help you file your legal business entity online.
3. EIN and your business bank account
Your Employer Identification Number or EIN is essential to your credit score. Your business EIN is equivalent to a social security number and appears on all credit profiles. Lenders use your EIN to check your creditworthiness. You also need the number to apply for a business bank account and credit card.
You can get an EIN online from the IRS website, but you must first set up your business before applying.
Once you have received the EIN, obtain a business bank account and a business credit card. Credit bureaus still check credit eligibility through banks, and some credit cards report to them. Online banking helps you make sure you don’t miss a payment and maintain your good credit rating.
4. Create a business website
Your company’s website is one of the places lenders will visit when you apply for a line of credit. They are interested in seeing what your business does, its location, and your customer profile.
Therefore, a good website will definitely give your business more credibility. Building a professional, easy-to-navigate website doesn’t have to cost you a fortune. Online website builders like GoDaddy and HostGator make it easier for you to create a scalable website that can grow with your business.
5. Net-30 Accounts Payable and How They Relate to Business Credit Bureaus
Net 30 vendor accounts allow you to make purchases on credit for your business. They’re easy to set up and order online, giving you more time to grow your business. They have a payment term of 30 days from the invoice date and they report your payments to the business credit bureaus. As long as you pay before or on the due date, you are helping to build business credit
Once your business pays them regularly, you can even apply for higher lines of credit. The more Net-30 providers your business has, the better, as they report to credit reporting agencies such as Dun & Bradstreet, Equifax Small Business, Creditsafe and SBFE.
Online resources are everywhere today, helping you ensure your business success and build your business credit. TRUiC offers several online resources to help you every step of the way. Don’t forget that keeping track of your credit scores is also essential, so make sure you know your credit history by pulling online business credit reports from the credit bureaus every six months.