The 6 Things Business Owners Need to Establish Credit
As a business owner, you’ve probably heard this time and time again: “According to the Small Business Administration (SBA), approximately 90% of all small enterprises fail within the first two years of operation.”
One of the contributing factors to this high failure rate is a lack of funding. However, smart, and savvy business owners overcome this hurdle by establishing business credit right from the beginning.
Here are 7 Things you should do:
#1: Business Phone: Lenders and suppliers will verify your company phone listing as part of the business verification process. If you are a non-listed business, it may trigger a red flag and result in a denial of credit.
#2: Business Address: Although it’s not mandatory, a commercial address for your company speaks volumes in terms of credibility. Many small business owners utilize a virtual office location as a cost-effective alternative.
#3: Business Bank Account: A company’s business bank account is how an owner establishes order in business revenues and expenses. In some instances, a lender may contact bank references, so maintaining a positive banking relationship is vital to a company’s funding ability.
#4: D-U-N-S® Number: This nine-digit number issued by Dun & Bradstreet is the most widely used number to identify businesses in the U.S. Many suppliers and lenders will pull your company’s business credit report from D&B to assess your company’s creditworthiness.
#5: Trade References: The ability to supply trade references on applications for business credit is essential to showing potential creditors that your business is creditworthy. Suppliers and lenders may contact trade references to verify your payment experience with them as part of their credit approval process.
#6: Separate Legal Business Entity: In the eyes of lenders, if you operate as a sole proprietorship you carry a much greater risk compared to a corporation or limited liability company (LLC). By selecting a “safe” legal structure such as an LLC, it limits the personal liability of the owners. Remember, picking the right entity structure is crucial, since your decision can impact how you pay taxes, how much paperwork is required to file and how your business can distribute its profits.
All of these factors may play a role in determining how fundable your business is. Lenders also take the age of your business, revenues and the type of industry you’re involved in into consideration.
If you need access to funding for your business, we offer various types of alternative financing programs. Give us a call to go over your options. (201) 699-0688
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