Creating a limited liability company (LLC) is a great way to protect your personal assets and establish a separate legal entity for your business. But did you know that you can also use an LLC to build business credit? Yes, it's possible to establish debt-free business credit and access greater financial capacity for your growing business. Here's how. The first step is to incorporate your company or form an LLC. This will give you an Employer Identification Number (EIN) from the Internal Revenue Service (IRS).
An EIN is basically a social security number for a business and it's required on federal tax returns and to open a business bank account in the name of the corporation or LLC. It's also increasingly required by larger companies from their suppliers in order to pay them for services provided. Once you have an EIN, you can start building your business credit. One way is to use net-30 accounts from vendors who declare business credit accounts. This means you'll need to pay the balance in full within 30 days.
You can also use services like Nav's Business Boost or Business Loan Builder, which include transaction reports to major business credit agencies. And finally, you can use a service like eCredable Business Lift to report the bills your company pays. It's important to start building your company's credit rating as soon as possible, as it takes time for credit bureaus to see changes in your profile. Make sure you always pay your current 30 net business accounts on time, just like other lenders. This will help keep your company's finances separate from your personal finances and help protect your privacy. If you don't qualify for a business credit card, don't worry.
You can still get access to funding with bad credit. Look for companies that offer loans to people with bad credit and depending on your financial situation and cash flow, there are options for obtaining funding in less than 6 months. Creating an LLC is a great way to protect your personal assets and establish a separate legal entity for your business. But it can also be used to build business credit and access greater financial capacity for your growing business. With the right steps, you can establish debt-free business credit and get access to funding even with bad credit.