How to Build Business Credit Accounts with Vendors and Suppliers

Building a business credit account may not have been one of your objectives when you started your business. You are not alone. You are in the company of many other businesspeople who keep making the same mistake. If you didn't know, building your business credit accounts with vendors and suppliers is one of the most strategic moves you will make to improve your business ventures. Although many suppliers and vendors do not report, it would help find out if your suppliers do so. If they don't, you should request them to do it. In the event of their reluctance, you should seek others who do so. You may now be wondering why we are on the brink of ordering you to do some things. Well, read on. Once you understand the importance, you will not hesitate to deal with vendors and suppliers who report to credit reference bureaus.

Why You Should Establish Business Credit History

Establishing business credit is a central part of pursuing success in business. Any new business hoping to excel should build business credit because:

It helps you maintain a business credit history that is separate from your credit profile, hence empowering you to enjoy the gains of a good business credit score
It showcases the difference between the owners of a business and the business

Why the Credit History Should Be Separated

When you separate personal credit history from your business credit, it helps you to avoid any negative interactive influence one may have on another. For instance, if your credit score is on a wavy trajectory, your business creditworthiness will not be affected. The reverse is also true. When you separate your business from your personal finance life, you protect yourself against personal property loss if your business fails to meet its debt obligations. Incorporating a business means giving it a separate legal status from the owners. Such legal independence is a common feature among corporations and Limited Liability Companies.

So, How Do You Build A Good Business Credit Account With Your Suppliers And Vendors?

First of all, you need to secure a federal tax identification number, commonly referred to as EIN. This is a number provided by social security services to business entities. It is mandatory when sending the tax filings for federal tax accounts. The number is also required when opening a bank account for business in the company's name. Many large businesses also request their suppliers to provide their EIN to process payments.
After you acquire the social security number for your business, you need to open a bank account. Once you have successfully opened such an account, make sure that you process your business payments through the account. If you have a credit card you use to pay for business bills, make sure you make such payments via your business checking account.
Acquire a business phone number. Whatever type of phone service you use, make sure that you have separate numbers, lines, business, and dealings. Your business line should be registered under the legal name of the business. Remember to list the number in the business directory for potential clients and partners to reach you easily.
Open a business credit file with all available credit reporting agencies.
Get a business credit card. Make sure that you have obtained at least one credit card for business. Such a card should be from a firm that reports to the credit scoring agencies.
Develop a credit line with suppliers and vendors. Develop a relationship with a good number of vendors, say five or six. This relationship will help you to build your credit score. Make sure that such suppliers all report to the agencies. Since it is not a must for companies to report credit scores, you should request your suppliers and vendors to do so.
Pay bills on time. Your business credit will be affected by late payments.

The Advantages of Building a Good Business Credit Score

When your business has a good business credit score, you are more likely to get valuable payment terms with new suppliers.

It reduces the frequency of having to prepay for services and goods.
You are likely to secure friendly interest rates and terms from loaners such as banks.

Conclusion

Like other good things in life, a good credit score is built and nurtured. One of the essential aspects of building a good credit score is to build business credit accounts with your suppliers and vendors. It will not only enhance your business's value but prevent your credit score from interacting with your business credit score. You can even check out how to improve your business score here or contact us for private consultation.