If you own a business and you still haven’t established a line of credit for that business, then you are missing out on a big opportunity. At one point or another, you will need to secure loans to fund your company’s growth, and it would be a bad idea to do all of that on your personal credit account for many reasons. Some of them include personal liability that results by commingling funds, potential IRS problems, professional appearance. You can now build and maintain a line of credit as a business owner, which is separate from the credit you have established as an individual and experts suggest doing so.
When you do have credit to fund your business growth, it is vital that you establish a habit of business credit monitoring as partof your company’s overall strategy. It is extremely beneficial and would be a big help in developing your company’s credibility in the industry. Think of it as similar to protecting and monitoring your personal credit standing. You wouldn’t like to see your credit reports reflecting poor scores, would you?
Here are a few of the reasons for monitoring your credit:
- You need to be aware where you stand with regards to your business credit before you start applying for loans with banks or other lenders. Monitoring your business credit will let you gain a better understanding about the kinds of financing packages you may qualify for, as well as the best time to file that loan application. Lending companies will check out your company’s credit reports, so you need to know beforehand if they are in good shape or not.
- Business credit monitoring lets you know if there are any inaccuracies or errors that are reflected on your credit reports. This is especially important if you’re currently negotiating with financial institutions about opening an account or securing a loan. Erroneous reports will result in bad credit scores, which in turn will reflect on you and your company’s credibility, thus resulting in even more bad credit. It’s a loophole that you would like to avoid at all costs.
- Being aware of your business credit profile will let you avoid being victimized by identity theft, or at least nip it in the bud, thereby minimizing the losses from fraud. If you don’t, your company could incur huge financial losses, which will cause problems with your business partners and creditors. This is a vital part in credit protection, and one that you should never overlook.
Starting a new business entails a lot of planning and organization. You are kept busy at all times, trying to deal with several issues all at once. This is a common reason why a lot of entrepreneurs often neglect their business credit until it’s too late. If you need to be on top of things when it comes to your company, establishing and monitoring your business credit should also be a priority.
So now that you know the business credit monitoring advantages, let’s take a look at the basic steps for credit monitoring that every business owner should follow:
- Find out whether or not you already have a business credit file with any one of the three bureau’s that handle business credit files, namely Business Experian, Dun and Bradstreet or Business Equifax. It’s as easy as calling their customer service line or visiting their official website. If your company has a file, you should then review it to determine the information it contains and what it says about your business. Take steps to correct any mistakes in that file, or you can add more information if necessary.
- If you don’t have a file yet, you should immediately apply for a DUNS number, which is used by other companies to identify your business. This is especially important for those who are just starting out and need to start their own business credit file. Anyone that you do business with will be able to look up your company through your unique DUNS number, so that they can determine what your company’s current financial situation is. Another thing you will need is a Federal Employer Identification Number according to Experian.
- Establish a credit history for your business. You may have started your business by purchasing supplies and paying for services through your personal credit accounts, and that’s fine. But if you’re going to do business with bigger companies in the future, then you need to establish your business credit as soon as possible. You can accomplish this by signing up for services in your company’s name, such as an internet connection or phone lines. You can also open a separate bank account to use for your business’ financials.
- Secure a copy of your business credit report and analyze it thoroughly. Make sure that the information it contains is accurate and complete. Check, modify, and add any references, relationships, and contact information that is needed. This is the file that other companies will look at when they need to get a complete picture of your business’ financial and credit status, so make sure that it represents your company in a concrete and correct manner.
Joy Mali is an active blogger who is fond of sharing interesting finance related articles to encourage people to manage and protect their finances. Follow her and learn how to prevent identity theft and credit fraud.