Starting your own business in New York is an exciting venture but comes with many risks. One of the biggest risks is running out of money.
When you open your business, you likely have money set aside to run it for a couple of months, but business credit is what will increase your chance of your business succeeding long-term.
Without business credit, you will be forced to rely on the money you make to pay your expenses as they arise. Additionally, it takes time for most new businesses to generate positive cash flow, which means you will need to have credit to keep your business afloat after its launch.
Types of business credit
The benefits to business credit should be obvious. They allow you to purchase the equipment, products and services you need to run your business, even if you do not have cash on hand.
A small business loan or a business credit card are two of the most common forms of business credit. Once you secure one of these, your business credit will build up slowly over time.
Register your business and open accounts
There are several steps you can take to start to build up your business credit. Set up your business with its own name, address, phone number and EIN number, which is a unique number that identifies your business to the IRS for tax purposes.
Open business accounts and start developing relationships with your vendors and creditors. Establish credit terms and always pay on time, or early, if possible.
Monitor your business credit score
Keep detailed records and keep track of your income and expenses. Try to keep your business and personal finances separate.
Regularly monitor your business credit score. This can notify you to any changes that could affect your credit score or alert you to any identify theft.
The impact of your personal credit score
While it is not necessary for you to have good personal credit to build good business credit, it does help. If your personal credit is not good, you might have a harder time building business credit.
Experienced business attorneys can help you learn the best ways to build and maintain good business credit, which can lead to many years of successfully running your business.
