Building business credit is an important part of operating and growing a business.
Although you might not need financing in the early stages of your business, there will come a point in time when having a positive business credit score will come in handy.
Banks and other financial institutions look at your creditworthiness when determining whether to give your company financing, utilizing tools such as VR business credit to establish your company’s level of risk.
The better your business credit, the better your company’s chances of accessing funding.
That’s why it’s important that you understand how to build business credit and the advantages of maintaining a good score. A good business score can also help protect your personal credit and increase the value of your company.
A key part of establishing business credit is using a commercial address.
In this article, we’ll explain how to build business credit, the advantages of maintaining a good score, and why it’s worth obtaining a virtual address for business credit.
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What is Business Credit?
Business credit is a company’s creditworthiness, meaning its ability to qualify for financing.
Business credit is separate from personal credit. It is based on the financial and operational performance of the business, rather than the personal credit of the business owner.
With personal credit, your financial history is tied to your social security number (SSN). For your business credit, your company’s financial history is tied to its employer identification number (EIN).
Business credit is a track record of your company’s financial responsibility. Potential lenders will use this to assess whether your business is a good candidate to lend money to, based on its creditworthiness, financial history, and reputation.
Lenders have different ways to assess your company’s creditworthiness. Some may use a viability rating (VR) tool, which provides a comprehensive snapshot of your business and helps lenders determine whether your company would be able to repay its debts as they come due.
VR business credit may be based on past performance, projected future performance, or a combination of the two.
Your company’s viability rating can change over time as its credit risk changes. With careful management, your company’s viability can improve, placing it in a more favorable position to acquire funding in future.
What are the Advantages of Good Business Credit?
A good business credit score offers important benefits for your company, including:
- Access to capital for future growth, expansion, and day-to-day operations, which can help your company grow and increase its value.
- Better terms and rates on loans, credit lines, and other financing options, including insurance premiums, making it easier to manage cash flow and invest in future growth.
- Establishing business credit enables you to separate personal and business finances, which protects your personal assets and credit history in case your business runs into financial difficulties.
There are various ways to establish or improve business credit, even if you are starting a business from scratch or your business has a poor credit history.
Utilizing a commercial address for your business is an important factor, as we explain below.
Most importantly, building and maintaining strong business credit requires a consistent record of paying bills on time, managing debt responsibly, and maintaining a positive credit history.
Why Do I Need a Commercial Address to Acquire Business Credit?
Banks and merchant services generally don’t accept residential or PO Box addresses as business addresses for LLCs or corporations.
Using your home address for your business can pose legal and privacy issues.
Here are the main reasons why using a virtual address for business credit matters:
- Liability reduction: For entities like LLCs or corporations, separating your personal address from your business address is crucial for liability protection. It helps to establish a clear boundary between personal and business finances and assets.
- Privacy protection: Using your home address for business documents may compromise your privacy. A separate business address helps avoid unwanted visitors and maintains personal confidentiality.
- Legal compliance: Running a business from home may violate lease agreements or homeowners’ association rules. Zoning laws may also restrict certain business activities. A dedicated business address ensures legal compliance.
- Professional image: In terms of professionalism, a commercial address gives your business credibility from the outside. This is an important factor for lenders.
Moreover, LLCs, corporations, limited partnerships, and limited liability partnerships require a registered agent address in the state in which they will be registered in order to be approved (PO Boxes cannot be used for these purposes).
Although home addresses can be used as a registered agent address, when a company is set up as an LLC, the address used is a matter of public record, which brings up security and privacy issues.
What is the Best Virtual Address for Business Credit?
The best virtual address for business credit is a physical commercial address, such as those provided by Alliance Virtual Offices.
Every virtual office from Alliance is situated at a physical office building with professional workspace, onsite management staff, and a recognizable street address.
Even if you carry out most of your work from home, an Alliance Virtual Office provides you with a prestigious commercial address that protects your home address and personal details.
A virtual office from Alliance can be used as your business address for your LLC, corporation, or other legal entity.
It helps you maintain your privacy and security, all while adhering to the laws of your state. With a virtual office from Alliance, you can establish your presence in any market.
Therefore, virtual offices are regularly used by companies to apply for business credit.
In addition to using a business address, there are other ways to further strengthen your business credit. These are outlined below.
Don’t let your address hold you back from success!
Upgrade your business image and ensure compliance with legal and financial requirements by getting a virtual office address from Alliance in the location of your choosing.
A virtual office provides you with a prestigious commercial address that can be used as your business address for LLCs, corporations, and other legal entities. It also helps you maintain your privacy and security, all while adhering to the laws of your state. With a virtual office from Alliance, you can establish your presence in any market.
Don’t let your address limit your business’s growth and potential. Get a virtual office address to take your business to the next level!
How Do I Get Business Credit?
There are various steps you can take to build business credit:
1. Separate your business and personal finances:
By forming a legal business entity, such as a corporation or LLC, you will separate your business and personal finances, laying the foundation for a distinct business credit profile.
2. Obtain an EIN (Employer Identification Number):
An EIN is like a social security number for your business. It’s necessary for opening a business bank account and is often required by creditors when establishing credit.
3. Establish a commercial address:
Having a business address distinct from your personal address is essential for building credit. It shows lenders that your business finances are separate from your personal finances, and adds legitimacy to your business. Lenders generally prefer a physical address over a PO box or a home address. Good news is, behind every business address from Alliance Virtual Offices is a professionally managed business center in a physical office building with a recognizable street address.
4. Use a business phone number:
For the same reasons, utilize a local or toll-free business phone number. It demonstrates that your business is a credible entity, and you can add your number to directories such as the 411 national directory to increase visibility and demonstrate that your business is a legitimate, thriving entity. According to Nav, it’s important to maintain a consistent, reputable image to ensure your business appears professional and established to potential lenders.
5. Be consistent:
Ensure consistent use of your address, phone number, business name, and contact details across all your marketing and business documentation. This will help maintain your business information integrity. If you change your address or contact details, be sure to update your business credit providers. Any discrepancies in the addresses associated with your credit history could raise questions and delay future funding processes.
6. Open a business bank account:
A dedicated business bank account helps in managing finances separately and is a prerequisite for building business credit. Ensure all your business transactions flow through your company bank account. If possible, acquire a credit card through your business account. Credit card companies report to credit reporting agencies, so acquiring a credit card can be an effective way to build business credit.
7. Always pay bills on time:
Paying bills on time is equated to reliability and your ability to pay off your debt. Late payments will always bring down your credit score.
8. Use vendors that report to credit agencies.
Establish relationships with suppliers and vendors who offer trade credit, and who report your payment history to business credit bureaus. For example, Alliance Virtual Offices reports to Creditsafe every month, which in turn reports our clients’ credit histories to Experian and Equifax.
9. Monitor your business credit report:
Regularly check your business credit report for accuracy and address any discrepancies promptly. Although business credit reports and scores aren’t free, you should purchase them at least once a year to check your credit score. Regularly reviewing your credit report and actively working to strengthen your credit profile will contribute to long-term financial success for your business. These reports can also help you pick up any issues that aren’t accurate. This last step is particularly important if you’re thinking about applying for a business loan.
Building strong business credit takes time and consistency.
It’s essential to manage your finances responsibly and make on-time payments for all your financial obligations, as this will create a positive payment history and help your business establish a strong business credit score.
Can I Get Business Credit Card Without Personal Guarantee?
You can get a business credit card without personal guarantee if you can qualify for one — this is the tricky part.
These types of credit cards are desirable because they eliminate an owner’s personal liability to repay card debt. Because this involves a certain amount of risk, these types of credit cards are typically issued to businesses with at least $1 million to $4 million in annual revenues. Credit cards with no personal guarantee typically also require that the card is paid in full every month.
You should avoid taking personal liability for anything your business does. Using personal liability to help your business risks merging your personal and business finances. If your business runs into financial trouble, your personal assets could be at risk.
You can learn more about these types of business credit cards and their respective requirements here.
For small businesses, a small business credit card with a low interest rate could be a better option.
Getting the best low interest rates requires a positive payment history and credit score – and now that you’ve read this article, you should be in a better position to begin establishing a favorable credit score for your business.
Whether you’re a small business owner, entrepreneur, or you’re simply thinking about launching a business, it’s important that you understand how to build business credit and the different steps you can take to build and maintain a good score.
A commercial address associated with your business will help you to establish business credit by giving credibility, separation, and consistency to your business.
A Virtual Office address from Alliance can also be used for business licenses, permits, entity registration, to receive mail, and to create a visible, marketable presence for your business, helping you to achieve long-term stability in your chosen market.
Remember, when you purchase a Virtual Office from Alliance, your address is located at a managed business center in a physical office building. Onsite staff handles your mail and there is professional onsite space too – perfect for meeting clients or collaborating with your team.
Search hundreds of recognized virtual addresses and buy online today!