Most people don’t know the right way to go about building credit for their business. They do several things that might actually hinder their chances of obtaining credit, or they simply don’t do the simple things that would ensure their business credit. To help in light of the current credit crunch, below is a suggestion list on mistakes to avoid when building your business credit.
Many businesses don’t realize just how important it is to select the correct entity for your business. This is not only the most important step in obtaining future credit, but it is also extremely important to your business come tax season.
If you have inconsistent information on your business paperwork and forms, this will greatly reduce your chance of getting any sort of business credit. Banks want to see consecutive information that is well put together and sorted, this tells them that the business is not only in good standing but that the owner truly does know how to run a business.
Some businesses have made the mistake of building credit with the wrong vendors. There are thousands of vendors out there to choose from, but only about 6,000 of them actually report to the credit bureaus. So you may be in good standing with your vendor, but if they don’t report it then it really doesn’t do you much good for your credit, as stated on ActiveRain.com.
Selecting the wrong SIC code. There are certain codes that the business credit bureaus and lenders tend to stay away from. These industries include real estate investing, car sales, adult entertainment, travel, lending, restaurants, and dry cleaners. When you classify your business be sure to stay away from these classifications.