Starting a new business in America is a thrilling venture. However, there are fiscal forces that must be reckoned with, too. The funds that can be accessed through personal savings and credit cards are only so extensive. Therefore, establishing a good start up business credit standing as early as possible in a start-up operation has proved to be among the most shrewd steps a new entrepreneur could possibly undertake. This 30-day plan was created by entrepreneurs who know that a start-up in America has a working understanding of all that has been shared up to this point, but simply want a plan that will give concrete results.
Week 1: Setting the Legal and Financial Foundation
When you are getting started with the establishment of business credit, the first week involves establishing the foundation for the business. This is basically the establishment of the proper legal and financial structure. When the lenders and credit reporting agencies review loan application processes, they are evaluating you for consistency. It is therefore important for you to be sure that the information you are providing is the same everywhere you provide it. To start with, be certain that you have registered your business with the state, including acquiring an EIN number.
Afterward, open a business checking account. This is done for the purpose of building your start up business credit, thus establishing that the business is separate from you. Further, be certain to apply for a D-U-N-S Number with Dun & Bradstreet. You will be required to provide this information in registering payments for the business. Further, be certain to confirm the information for the business address, phone number, and NAICS number. Failure to ensure that the information is correct may lead to a delay in approvals.
Week 2: Add Your First Tradelines
From days 8 to 14, you will be working on creating some measurable activity for the credit bureaus. Vendor accounts are now the way to success. Choose vendors that are in the habit of reporting their payment information to the major start up business credit and are easily prone to new business ventures, and will give you credit even if you lack credit and history. Make payments for things you know you can easily buy, such as office supplies and software, and pay for them, and then pay their bills in advance.
In fact, this is one of the best ways to instill trust in them and is the easiest and fastest method to generate momentum in establishing start up business credits for your business. At this stage, it has little to do with how much you spend and is based on how much discipline you possess. Avoid the pitfall of asking for multiple vendor accounts in one day. By spreading out applications, you project maturity and will keep the lenders reviewing your profile from becoming spooked.
Week 3: Improve & Monitor Your Credit Report
In the third week of this process, you have created a whole new group of tradelines. Now you can see how everything connects and what effect this has on your business credit report. Take some time during this week to get your business credit reports and verify that all payments (the ones from your new tradelines) are being reported on each of them. You can also consider adding more vendors and/or additional retail accounts at this time as well. If you stay up-to-date with your payments, you will create more opportunities to build your start-up business credit beyond what you would traditionally build with your regular credit accounts. If you notice any mistakes/incorrect information on any of your reports (incorrect balances, etc.), you should report them to the credit reporting agencies immediately.
Week 4: Prepare for Real Financing Opportunities
In the final 7-10 days, you can now change your focus from building to leveraging. Since you have healthy lines of business, you can now start preparing for future lenders. Most entrepreneurs will begin looking for a start up business loan to fund their inventory, marketing, and equipment during this level. Even if you are still new in business, having good credit can significantly increase your approval rating. One of the main reasons that banks require good start up business credit is to evaluate repayment ability and financial reliability. In addition, a solid credit profile allows you to qualify for the use of alternative start up business funding sources and net-30/60 arrangements, which are more heavily dependent upon the company’s credit.
Conclusion
The needs of establishing a start up business credit do not involve guessing or waiting. This might seem a little counterintuitive to what you would expect, but with a precise 30-day plan in place, a startup business will discover the effectiveness of a quick turnaround time. It simply involves following the correct procedure while maintaining the right amount of patience in understanding that every prompt payment increases the credit of your startup business.
Disclaimer:
This material is provided for general educational purposes only and does not constitute financial, legal, or professional advice. Business credit laws, lending requirements, and reporting practices can vary by lender, state, and individual circumstances. Results are not guaranteed, and credit approvals depend on many factors beyond the steps described. Readers should conduct their own research and consult qualified legal, financial, or business professionals before making decisions related to business formation, credit building, or financing.