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How To Build Your Black Business Credit Profile

For a business to be in the favor of lenders and to obtain the necessary funding for its future capital needs, having a favorable credit score is very vital. But a good credit rating does not happen overnight.  Here are the steps to follow for any entrepreneur to establish credit: 

These steps will help improve a business’ credit rating as well as maintain a favorable reputation to lenders and investors. 

1. Make sure that your business has a legal entity 
Your business will have a difficult time establishing business credit if it does not have an entity unto itself. Thus, it is necessary for you to be incorporated or to form an LLC (Limited Liability Company). You need to demonstrate that the business is separate from the owners. With sole proprietorships and general partnerships, the business is legally the same as the owner; therefore, there can be no separation of business credit history from personal. 

Lenders will be reluctant to entrust an entrepreneur with a loan to a sole proprietor because they fear it might really be or end up being a personal loan in disguise. 

2. Have a reliable address, a telephone line, e-mail and internet service

Having a reliable physical location for your company adds credibility for lenders to believe that your company is legitimate. Make sure your corporate address is not your home address. 

Whether you use a landline, cell phone or you use VoIP, have a separate number for your business and in your business’s legal name. Having the right means for people to contact you is necessary. So make sure you have a telephone line as well as an e-mail address and even a web site for faster communication. Make sure your contact information is listed in the directories.

3. Check Your Business Listings

Have your company enlisted under all the necessary agencies and make sure that all your listings are under the same exact legal name as well as with the same exact phone number and address.

It is very important for all your personal creditors to recognize you are listed under a uniform identity. 

4. Obtain All Necessary Business Licenses, Permits, etc.
Obtain a business license for your company and, if applicable, a license for tax resale in the state, city or county location of your business. 

Follow all the necessary regulatory guidelines for running your business. 

5. Organize Financial Statements and Tax Returns
Open a business checking account in the legal business name. Be ready to present at least two years of financial statements, with which the help of a CPA is highly recommended. 

It is also very important, that your business at this time should already have its own tax ID number. The he EIN is basically a social security number for a business. It is required on federal tax filings, and is also required to open a business bank account in the name of the corporation or LLC.

Both federal and state business tax ID numbers should be enlisted under the same exact legal business name. 

6. Secure Bank References

A minimum of one bank reference is necessary for your business to establish its score. And it would be advisable if your bank account were at least active for two years, with a good stable balance of at least $10,000 for the past three months for it to be in a favorable position for lending. How you manage cash flow in your business will be reflected from your banking.

If you use a business credit card for many financial transactions, be sure to pay the credit card bill from your business checking account.

7. Obtain At Least Five Trade References

Your business will need five trade references that have given you a credit account. This may include your suppliers or any firm in which your company has purchased goods, preferably at a regular basis. 

Make sure to choose references that will give a favorable credit history to agencies investigating on your financial history.

8. File for Credit Report Agencies

Open a business credit file with all three business reporting agencies: Experian, Equifax and TransUnion. Get three business credit cards that do not have personal links to you and that will give business credit reporting agencies their feedback on your company. 

After doing all these, just remember to demonstrate your business is being operated with integrity. Of course, pay all your bills on time, and you will surely be able to attain an excellent business credit score.

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