Dealing with credit as a small business owner can be a bit different than how you deal with it on a personal level. As a business, you need to worry about employees, payroll and other high-priced expenses. If you have just started your own small business, there are a few things you should keep in mind when it comes to credit.
Separate your personal life from your business
As a small business owner, you probably have a tremendous amount of passion for what you do, especially if you built the business from the ground up. But when it comes to finances and credit, you should leave your personal life out of the business. Sinking your own money into your enterprise or ringing up business charges on your personal credit card can sink you into debt and hurt your credit score. Your best bet is to leave the personal stuff at home when you go to work because you don't want to go in debt while you are trying to get a small business going.
Register your business
In order to get a company credit card or a business bank account, you will need an Employer Identification Number. Banks will generally want to see that your business is a separate legal entity before they issue you a loan. You can apply for a taxpayer ID numberwith the IRS. Properly setting up your business can help you build up credit and establish your business.
Ease into the business
When applying for a loan to bankroll your business, start out small and build from there. Asking for a huge loan at first may be tough because your business has very little credit. It will also be difficult to pay back a huge loan amount, especially if you have not done a lot of business yet.
Monitor your expenses and credit
Although a small business is different from your personal credit in terms of scale, there still are a number of things they share. Keeping an eye on your credit and paying on time are universal things you should do whether it be for a small business or your personal credit account. Making a late payment on a loan can hurt your businesses credit score just as it can hurt your personal credit score. If your business has bad credit it will be hard to apply for loans and turn a profit. Maintaining good bookkeeping and staying on top of credit can help take your business to the next level.