Ceci Amador

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Ceci Amador is based from wherever her laptop is. She enjoys traveling and visiting new flexible workspaces. If you'd like Ceci to check out your workspace, feel free to reach out to her (and send a plane ticket).

Why You Need a Commercial Address to Build Business Credit


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Building business credit is an important part of operating and growing a business. Though 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, which is 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.

Business credit is basically a track record of your company’s or investor’s financial responsibility. Similar to the personal credit score, the business credit score is used to determine whether your business is a good candidate to lend money to, it can also help get lower interest rates and insurance premiums. Understanding business credit is the first step, the next step is to understand how to build business credit.


  1. Why Do I Need a Commercial Address to Acquire Business Credit?

  2. How Do I Get Business Credit?

  3. Business Credit Card Without Personal Guarantee

  4. Conclusion


Why Do I Need a Commercial Address to Acquire Business Credit?

For starters, commercial addresses help give a business credibility from the outside. But more importantly, banks and merchant services generally don’t accept residential or PO Box addresses as business addresses for LLCs or corporations.

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). Though 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. Last but not least, in some regions, homeowners’ association laws don’t allow for businesses to be run out of residential areas.

Having a commercial address also helps put your business on the map and it can pave the way to open a business credit file. This requires that you have a phone number that’s listed in a directory, that you open a bank account in your business name, and that you set up bills and utilities in your company’s name. To do all of this, you need a commercial address that can be verified.


How Do I Get Business Credit?

Onto the big question, how to get business credit? There are various ways and steps you can take to build business credit. Nav, a business credit score company, lists 8 key steps to build business credit.


1. Put your business on the map: have a listed commercial address, have a phone number, list your number in a directory, set up a bank account for your business, use that account to pay bills, and make sure that all business bills, utilities, etc. are registered with your business address. You need consistency and credibility.


2. Maintain a good credit relationship with vendors and suppliers: according to Nav, “a solid line of credit with industry relevant vendors or suppliers is like gold” as it can help you avoid paying upfront for some services or products. The key part here is to make sure that these vendors or suppliers report your payments to business credit reporting agencies, this will help you establish, build, and maintain a positive business credit history.


3. Get an employer identification number (EIN): EIN is the social security number of your company. It is required to create an EIN when incorporating, forming a partnership or LLC, and is often needed when working as a sole proprietor.


4. Always pay on time: this is the most important aspect to building a good credit score. 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 (in personal and business situations). Set up reminders on your phone or calendar, but make sure you’re always on time with payments.


5. Get a business credit card: credit card companies report to credit reporting agencies, so acquiring a credit card is an effective way to build business credit (granted that you pay your credit card bills on time, all the time).


6. Get incorporated: adding Inc. or LLC. to your business will legally separate your business from your personal profile, which will, therefore, separate your business and personal credit history. Not only will this help build your business credit score, especially if your personal one is not where you’d want it to be, but it can also offer some protection should things go downward with your business.


7. Separate personal from business expenses: if you become incorporated, this will happen naturally, but you need to make sure you’re not mixing business and personal expenses. Be strict about using your business credit card only for business purposes, this will help create some distance and also make it easier to manage and file taxes.


8. Monitor your credit: though business credit reports and scores aren’t free, you need to purchase them at least once a year to check your credit score. These reports can also help you pick up any issues that aren’t accurate and that you can dispute should you find an error. This last step is particularly important if you’re thinking about applying for a business loan.


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.

This is why for small businesses, small business credit cards tend to be the best solution, as these often offer low-interest rates and several rewards.

If, however, you do meet the annual revenue and credit card spending requirements, there are three different types of business credit cards with no personal guarantee: corporate credit card, corporate gas card, prepaid credit card. You can learn more about these and their respective requirements here.


Conclusion

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. One good place to start to build business credit score is to have a commercial address associated with your business, this will give credibility to your business and it will also come in handy for licenses, permits, registration, and opening a bank account and credit card.



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