How to Improve Your Business’s Credit

Why is business credit so important? It's the main way companies evaluate whether they want to do business with you, and on what terms.

It's critical that you separate business and personal credit. Just because you effectively manage your personal credit doesn't mean that you will be able to get a loan or other credit for your business. The two types of credit are very different, and your personal credit could suffer if you use it for business purposes. In general, the strategy to build your business credit is much more straightforward -- if you follow the necessary steps in the correct order.

First, name your business. As you do this, remember this name must be on your stationery, listed in the Yellow Pages, on your Web site, on your bank account, on trade charge accounts and business credit cards, and on product packaging and marketing materials. In addition, it should be easy to remember for anyone who does business with you. It will be essential, for your business credit rating, to be absolutely consistent with name usage. Follow the naming process in your state to reserve your company name.

Next, you need to incorporate. Unless you're knowledgeable about the advantages and disadvantages of a corporation versus a limited liability company in your state, consult an accountant or corporate attorney about the best structure for your needs. With forms and instructions available on Secretary of State Web sites, most states have made incorporating simple enough that you can probably do it yourself, after you decide on which corporate structure to form.

Decide where your business will be located. If it's a home-based business, use your home address for all billing. You may prefer to have bills sent to a post office box. If so, be sure all company documents, checks, accounts, etc., include both your mailing address and your actual business address.

Apply for your EIN (Employment Identification Number) from the IRS in your company's name. You can do this online by phone, fax, or mail. The IRS has made the application process easy. Your EIN will be the tax identification number for your business, just as your Social Security number is your personal tax ID.

Establish a business phone line with your company name listed in 411 and with an automatic Yellow Pages listing. In some areas, you can establish a business line (listed with 411) for a minimum monthly charge. All calls to your published business line can be forwarded to another phone, such as your home phone or a cell phone. Again, your billing address for the phone should be the same address as your company location.

Open a business checking account. Often, smaller community banks will be more accommodating to small local companies. They may require a lower minimum balance and offer more generous transaction processing fees than larger banks. It will be worth your time to evaluate a variety of banks before you open a business account and begin to build a long-term relationship with one bank.

Secure all necessary business licenses and permits required for your type of business in your city and state.

As soon as you receive your first company phone bill, take it, along with your business checking account information, to your neighborhood Staples to open an account. Staples has a reputation for extending credit to small startups without requiring a personal credit reference. This business account will have Net 30 terms. This means it must be paid in 30 days. However, unlike personal credit, your business credit score gets a boost when you pay early. Charge some office supplies to your business account right away and pay the bill immediately.

To build your business credit make sure you plan your strategy and follow these steps carefully. Over time you will achieve your goal.

"The New York Times"