Building and Restoring an Excellent Credit Rating for Your Business - A Step by Step Guide
Credit and business go hand in hand. In today's world it is the yardstick by which other businesses will determine if "they want to do business with you" and on what terms.
You may well be the sole owner and proprietor of a small business. Money earned is your earnings from which you pay your expenses. In addition your record keeping may not be 100 % especially if you withdraw funds from the business or even at slow times or for convenience shunt shown money into the business accounts. If at some point you choose to expand your business - a larger plant, more employees or new and additional locations you may have difficulty obtaining sufficient credit capital , or the terms of interest may be higher than estimated , all because you lack a well laid out historical credit history.
It never hurts to have a clear , clearly laid out credit history for the purposes of your business. You may never need the money but it is always best to keep your options open as much as possible- first for the availability of loaning money for your business , to be able to negotiate good and perhaps even better rates of interest and service costs. Lastly one additional benefit is that it allows you options and services with additional banks and financial services should you wish to move your business elsewhere or even threaten to do so , in the face of high costs , poor service, lack of provision of a requested service or loan or all of the above.
What are the steps that should be followed in order to build a credit history that will be both be recognized . Your credit history should shout out "Solid" and "Consistent"
1) First name your business. Have he name registered with your local state and even federal filings. The name should be substantial and descriptive of either the trade you are in , or rely on some source of substance - for example using the well known reputation of a firm that has done business in your geographic area of business for a long time period. This name should and will be on all your company documents - stationary , business cards , domain name , chouse , business charge cards and accounts as well on your company's products and training materials - be they virtual , or actual physical products sold. In the case of physical products your name and logo should be clearly listed on product packaging. Remember each named account so to speak benefits the other. It is all a cumulative process and the sum is more than the addition of the individual parts.
2) Ensure that your name is well known and promoted. First and foremost is the phone company's "Yellow Pages" . True , with the addition of the internet and ecommerce , the phone company's service of the "Yellow Pages" do not carry the cachet and power that they once did. However you would be amazed at the level of credibility that they still confer. Being in the "Yellow Pages' will give your business and "instant credibility". To most consumers and to trade it will seem as if you have been in business of a long period of time and earned visibility , a loyal business base and following and most important credibility in the business and marketplace. The phone company , due to its reputation and former culture of always getting the job done , ensures the support of the statement - that if you are in the phone book then you must be legitimate. In addition you would be amazed at how many innocuous lists are formed from the "Yellow Pages". Another example of the spreading octopus and that the resulting sum is more than its parts. In addition you should register with as many trade and community organizations as you can. These can always be used at a later time for necessary references.
3) Incorporation. It is true that unless you are knowledgeable about the advantages and disadvantages of a corporation versus a limited company in your state , then consult a professional in your field. An accountant or corporate attorney should suffice in most cases. You may use the services of the professional to do the setup or if you feel proficient then you can avail yourself of the resources available online. Many locals have made available forms and instructions that can either be completed online or printed out and sent in.
4) Location - A physical location is essential . This will be listed on all your documents and support materials. If you choose to have rent or buy a commercial property , that is distinct from your home - as in the case of a retail outlet , that is good. If you choose to locate in your home , for reasons of convenience , economy and savings, that is also good. In such a situation use your home addressable aware that in some cities and states you are now required to have a license or certificate in order to transact such an operation legally out of your home. Failure to pay , what is usually a small fee, can result in somewhat major penalties. One last point is that you may choose to open a post office box for bills. This way your business mail is distinct and less likely to be lost or misplaced by any of the several persons in your house hold who may pick up your mail. However ensure that your company documents , chouse and accounts list both your physical location and mailing address.
5) Taxes and Registration for a Tax Certification Number- Apply for the EIN (Employment Identification Number) from the IRS in your company's name and location from the IRS. This an be done online or by phone, fax or mail. The procedure , which used to be lengthy and cumbersome, has now been facilitated and made relatively easy for most situations. Your EIN will be the tax identification number for your business in the same way that a Social Insurance Number is the basis of your personal identification .
6) Establish and identifiable , credible reliable phone number . Options are wider now. It used to be that you were limited to only the business phone service of the local phone company.
Now much of communication is done by the internet with email for communication and WebPages for listing product and service information. Phone services are available in a myriad of alternative services - many via the internet. You can have physical hardware with VOIP with services such as Vonage or a hardware free service with a system as provided by Skype. Most business have answering services that answer and channel the phone call as visitors call. A small single operation can sound just like a multi billion dollar one. The key is reliability both of sound levels and consistency of good service levels. You can use any of these services. The major important point is to get listed. Often now you can pay a fee to your local phone company to be in their business pages (Yellow Pages). In addition there are alternate third party services you can employ - usually for a lesser charge than the official Yellow Pages. In addition there are online resources that are used more and more - such as online phone directories ( such as 411.com) and Google maps commercial listings. You may have to manually submit to these services and you may well find that by submitting to one will lead to other listings over time as due course. Having a webpage online will facilitate this process and in addition lead to many automatic listings and notations from customers and trade sources , in their internal phone and commercial records
7 ) Open a specific distinct business checking account at the financial institution of your choosing. It is all a matter of personal preference and convenience. Some choose that the prestige and reputation of a large well known commercial bank is to their benefit while others choose a local bank , which may be more convenient and easier to develop a personal relationship with. It is better to not use online only banking services in favor of banking operations which in addition to being chartered have a physical location with which people can relate to. As your business becomes more and more successful , larger and profitable you may then chose on of these operations - to be trendy and save costs.. Again have your company checks and documents clearly list your business , address ,mailing address and phone numbers. It is often best to forgo trendy checks artistic format in lieu of more conservative presentations.
8) With an address , company name and official phone number you are now in the position of being able to purchase and register all necessary local , state and federal government licenses and permits required and essential for your type of business in your locale - be it state , municipality or city.
9) With all of the above in place you are now ready to "do business" and establish a solid credit history over time. Consistency is key. Pay as many bills as possible via your business accounts. Let it "snowball". You may even choose to build a history faster by actually loaning out relatively small amounts of money from your bank - to be paid back in full promptly.
One last point - consistency is everything after all your hard work and carefully laid plans. One red mark of an unpaid debt can ruin all of your careful preparations.
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