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
business people 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:
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.
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.