Being a business owner is not easy. It takes time, patience, sweat, and tears. It’s worth the reward of being free from a crazy boss, setting your own schedule, determining how much money you make, and having the freedom to do what you want. Are you ready to have that life? If so, start by getting your credit together!
To get business credit, financial institutions look at your personal credit history. Once you establish business credit, creditors will report your business credit to business credit agencies, which will protect your personal credit. Business organizations want to see whether you pay your bills on time, maximize your credit cards, and the biggest one of all, whether they can trust you with someone else’s money! When you get a credit card, that money doesn’t belong to you. It belongs to VISA, Master Card, Discover, American Express, etc. These corporations allow you to use their money to purchase things. NOTE: If you don’t want to use someone else’s money, you can open a secure credit card with your money. Go to Bank of America and get one. You can get a credit card from $300 up to $5,000. This card will allow you to build credit and increase your credit score.
If you need help or more information understanding credit, click on this link and read my blog on Credit.
The following steps will help you if your personal credit history is already together or when the time comes that you are ready to apply for business credit.
Step 1: Apply for an EIN (Employer Identification Number) / Federal Tax ID
According to the IRS, an EIN (Employer Identification Number) is a nine-digit number issued by the IRS to identify businesses and certain other entities. An EIN number (also called a Federal Tax ID) is commonly used to register your business with the federal government for taxing and banking purposes. This process is simple and FREE! Go to:
https://www.irs.gov/individuals/international-taxpayers/taxpayer-identification-numbers-tin. Once you complete the application, you will get a PDF reflecting your EIN, name, address, and business name. Save this form to your desktop and Google drive. When you go to the bank or any other financial institution, you will need it to apply for credit under your business name.
Remember: by creating business credit, banks, lenders, suppliers, investors, and retailers will open the door for your business and bring creditworthiness to your business. This will impact the amount of credit your business has, how long you have to pay the money back, and the interest rates and insurance premiums your business will pay.
Step 2: Get Your DUNS Number
A DUNS number is a unique nine-digit identification number for each business’s physical location. When you apply for credit, most lenders will look at this database to verify that you have a business in your name.
Go to https://fedgov.dnb.com/webform/ to register your business.
Step 3: Open a Business Account
Opening a business account is another way to establish a legitimate business. I’ve helped clients over the years, and many never had a business banking account. They were using their personal banking accounts to conduct their business affairs. That is WRONG! If you are guilty of doing the same, I urge you to change this. I use Bank of America personally, but you can pick any bank you like. You must be able to demonstrate that you receive funds, pay bills, pay employees, and show that you are responsible for the monies you receive. The only way to do this is through having a separate business banking account.
I’ve seen clients and business associates be passed over for grants, loans, and lines of credit because they didn’t have their business set up correctly in this way. Don’t be one of those people.
If you need guidance, I’m here to support you! Contact me here
Be aware, be informed!