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Establish Business Credit

April 14, 2012 by  
Filed under Finance

Business credit is a way to get financing without the use of credit ratings or personal assets. The question most new business owners have is how to establish this type of credit. There are a couple of different steps you can take. However, the main factor of business credit is to have a strong business in the start up. As long as your fundamentals are strong you are more likely to obtain the business credit you require without investing your personal credit scores in the mix. You also have to meet certain requirements created by the financiers.

Once you get these two things set up you can move on to the next step, which is to form business connections with suppliers and vendors. If you can get vendors or suppliers to extend you credit it will help you show business credit to the agencies. It takes at least five vendors to secure business credit to the agencies. They are also not going to tie this to your personal accounts or social security number. Instead they will tie it directly to your business. In some cases vendors and suppliers will not allow business credit, but you can find those that do.

You also need to have business credit cards that are not tied to your personal account. Credit card companies as you know report to credit agencies. If you can get business credit cards to report to your business ID number rather than your personal report you will establish business credit. If you establish business credit more financing doors will be open to you.

In fact banks like to see business credit where you have a strong background in your business. Even if your personal life is not doing as well, they cannot use your personal credit report. Instead they have to use your business credit for the business loan.

Another option that can help strengthen your situation is merchant funding. Merchant cash advances are like loans in most respects except for their regulations and interest. You are charged a fee rather than an interest rate. You also have the option of continuing the funding once you pay back the original loan, as long as your account was in good standing. Merchant funding will help you keep on track, while you establish business credit to get an affordable loan from a bank in the future because you will be able to make your payments to vendors.

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