Building Business Credit to Fund Your Small Business

Posted by Factor Funding Co. on January 17, 2012

All small business owners know that one of the biggest obstacles to growth is lack of cash flow. Since so many small businesses operate on very small profit margins finding ways to get funding for necessary expenses such as equipment, repairs and improvements can be difficult. This is why it's so important to build business credit to fund your small business. Having good business credit can literally make the difference between a great bottom line and bankruptcy. If you're interested in building business credit, here are a few ways to get started.

Open a Business Checking Account

The easiest way to start building business credit is to open a separate checking account exclusively for your business. This shouldn't cost you any money and it allows you to keep your business income and expenses completely separate from your personal funds. Be sure to inquire about any special bank programs for small business accounts.

Establish a Business Telephone Line

Once you have a dedicated business checking account, open your own telephone line for your business. Several telephone companies report account history to credit ratings bureaus, so if you select a participating company and you pay your bills on time, simply having the phone line can boost your business credit report.

Initiate Trade and Vendor Credit

Now that you have your foot in the credit door you should be able to open a small credit line with a few of your regular vendors. Ask about establishing an account at a vendor you've used frequently in the past. Many manufacturing and resale companies offer basic credit terms such as net 10 or net 30 plans to their regular customers. It's important that you find companies that do not require you to connect your business credit to your Social Security number. Ideally, you want to keep your business credit completely separate from your personal credit. In this way, your personal credit won't be affected if your business credit takes a hit due to slow sales or a loss.

Apply for a Business Credit Card or Two

Look around for a credit card company that is willing to offer you an account that is not tied to your personal credit history. It may take some time to find one, but it's worth it, since you want your business and personal credit to remain separate. You will also want to find a company that reports credit history to the credit bureaus so that you can continue building a good credit rating for your business.

Starting your own business poses several challenges of its own. By building business credit to fund small business, however, you can get access to quick financing that will help your business thrive during difficult times.

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