When you start a new business, one of the most difficult things you face is acquiring a loan to get started
. This is because you dont have business credit to show lenders that you are a credible borrower and you can repay your debt in a timely manner. It is important to establish business credit in order to be considered a legitimate organization. How can you establish business credit if lenders arent willing to take a risk on you? Here are some tips that will help you get on the right track with your corporate credit:
1. Acquire your LLC or EIN. You need this number from the IRS in order to be considered a legal and legitimate business.
2. Create your small business profile with Dun & Bradstreet. They will manage your corporate credit and they are responsible for sending out this information to lender when they ask for it.
3. Meet with your city officials to find out what the licensing procedures are and what you need to do in order to get your business up and running. You need a business license in order to gain a loan as lenders see this is a legal business and not a personal hobby.
4. Create a website for your business and start advertising your website. This is a great way to generate the type of interest you need for your business.
5. Set up a phone line and PO Box or physical address for your business. This will allow you to be considered a legal entity in the eyes of lenders.
While these tips will help your business credit needs, you also need to take a look at your personal credit. If you have bad credit, lenders see you as a high risk and they are going to have a hard time issuing credit to you because they feel you will manage your business finances in the same manner. In order to convince a lender why they should take a risk, you need to give them the credit score they are seeking which is anything above 700. Once you slip below 700, they are going to be very weary about you and will pass on your loan. Having a nice piece of real estate to use as collateral will also reduce the risk to the lender and it can provide you with the financing you need for your business. You do need to be careful with the collateral as you may be putting your home at risk.