When it comes to obtaining credit, the consumer side is relatively straightforward. Pay your bills on time, use the credit that you have responsibly, and you’ll see your buying power increase thanks to your credit improving almost automatically. On the business side, it’s a little different. Large corporations have little trouble with obtaining credit for purchases, but what if you’re a smaller practice – a vet clinic or a dental office, for instant?
There’s a pretty logical sequence of events in order to obtain business credit. Even when you’re a small or relatively new company, the process is mostly universal. You start by incorporating as a company and obtaining the proper credentials, then begin to place your bills in the company’s name and pay everything in a timely fashion. Let’s take a closer look at these steps.
Incorporating is the easiest part. It simply means making the business and its credit separate from you and your personal credit. You can do this by establishing the company as an LLC or a corporation. Establishing the company as a sole proprietorship won’t work, as the credit is still then reliant on you. Creating a separate entity and obtaining an Employer Identification Number, or EIN, is what you need to do. The EIN functions similar to your own social security number; all of your credit is tied back to that number and what debts or other accounts it has.
After you’ve set your company up as its own entity, the next step is to place all of your bills and any small debts in the company’s name. This will help to establish a track record of regular payments from the company. Even if you’re working with a limited amount of credit to begin with, smart management of that will reflect positively on your company and improve its credit profile. It’s just like handling personal credit: You work with what you have until a strong report you have the ability to gain more.
Throughout all of this, the most important thing is to maintain a timely track record with everything. Early in your company’s credit profile is the easiest time to manage everything, since you have few expenses. However, it’s also the easiest time to do long-term damage if you happen to drop the ball. Make sure that you’re handling everything promptly.
Once you’ve taken care of these steps, it’s relatively easy to find credit for any big purchases you may have. You’ll want to find the proper creditors – several institutions cater to specific business types. If you’re a vet clinic, dental or medical office, there are a few creditors that specialize in working with companies in your field. They understand the industry and have customized financial instruments to suit your needs.
Take time to review the options you have available, and choose the most favorable one. The most favorable one may not necessarily just be the lowest rate. It could be one that offers a slightly higher rate but has more incentives, for instance. Regardless, if you’ve established your company’s credit profile, you’ll have no issues in obtaining funding for your next big purchase.