Growing a business requires strategic financial planning, unparalleled discipline and in many cases, accessing the power of Other People’s Money (OPM). Business credit thus becomes the lifeline that sets the tempo for the entrepreneurial rhythm, providing a mechanism to navigate cash flow challenges, spur growth and preserve equity – if utilized wisely.

Establishing a strong business credit profile, however, is not a proverbial walk in the park. It demands due diligence, a smart approach and a comprehensive understanding of the underlying principles. As Kortney Murray, the founder and CEO of Coastal Kapital, rightly puts it, “Make smart decisions and back them with data, this will win the race every time.”

Embarking on the Business Credit Journey

The first step towards building a business credit portfolio is incorporating your business. Whether you are opting for an LLC, Corporation or other legal structures, incorporation sets the boundary between your personal and business finances and lays the foundational brick for building business credit.

Parallel to incorporation, obtaining an Employer Identification Number (EIN) from the IRS is crucial. This exclusive, nine-digit identifier is pivotal for tax purposes and is a pre-condition for opening a business bank account.

Nothing screams professionalism more than having a separate business bank account. Not only does it ensure streamlined management of business finances, but it also helps establish financial history and credibility – two critical components for building a robust business credit profile.

Navigating the Business Credit Landscape

Photo Credited to Kortney Murray

Understanding the sectors’ players is instrumental. From DUNS to Paynet and Business Experian, entrepreneurs must familiarize themselves with these business credit reporting agencies to understand the rules of the game better.

Opening utility and phone bills through your federal tax ID is another strategy to consider. It assists in creating a track record and further grounds your business’ financial identity.

Creating and Nurturing Vendor Partnerships

Establishing credit lines with vendors or suppliers who report to business credit bureaus is an ingenious workaround. Paying invoices promptly not only encourages credit extension from the supplier but also helps create a commendable payment history, improving your business credit scores.

Equipment Financing

In many cases, startups can leverage equipment financing to initiate scoring on instalment debt for their business. Since obtaining such financing is relatively easier, it can help businesses fast-track their credit-building process.

Business Credit Cards

Secured or unsecured business credit cards for daily expenses are a popular way to build credit, given payments are consistently made on time. They foster financial discipline and offer a practical avenue for emergencies without jeopardizing the business’ financial standing.

Conclusion

Navigating the world of business credit can seem intimidating, but with the right strategies in place, it can become a manageable, rewarding venture. From incorporating your business to establishing healthy vendor relationships, the pathway towards building a solid business credit profile is a constant learning curve and a journey, not a destination. Businesses, especially startups, must approach it with caution, knowledge, and at the right time in their growth trajectory. As Kortney expresses, “leveraging your money to grow is, in some cases, a necessity as you move to the next chapter of growth.” Indeed, the understanding and proper utilization of business credit is a decisive chapter in every successful business story.

If more guidance is needed on exploring these options, Coastal Kapital provides a wealth of information and helps businesses make the best loyal decisions with their long years of experience. For detailed inquiries and assistance, visit their website at https://coastalkapital.com/.