How to Obtain Corporate Credit

As the owner of your own business, you'll want to gain corporate credit for several reasons. For example, corporate credit lets you protect your personal credit line from liability and allows you to take out loans and leases necessary to operate.

Instructions

Difficulty: Easy

Things You’ll Need:

• Info on loan terms and conditions
• Ledger and software to track loans and ensure prompt payback
• Corporate legal status
• Directory to find small business lenders
• Corporate bank account
• ID numbers, DUNS number, FEIN number, applicable licenses and permits

1. Form a corporation. One common type of corporation is known as an LLC or limited liability corporation.
2. Collect the appropriate permits and ID numbers. One of the most important is known as the Federal Employer Identification Number (FEIN). You might also need certain licenses, sales tax numbers and state ID numbers.
3. With earmarked corporate funds, open a bank account under your corporation’s name at a reputable financial institution.
4. Acquire what is known formally as a Data Universal Numbering System ID number (DUNS). You can typically get a DUNS within just seven days of application.
5. Locate so-called friendly creditors by using online and offline resources. These are businesses that may be willing to lend to relatively new corporations. Make sure you understand the terms and conditions associated with these loans. What are the rates and fees? Are there annual charges? Will paying back the loans too fast entail penalties?
6. It’s better to take out small incremental loans at first to build your reputation. Then in the future you can qualify for better rates.
7. Start with small loans, and repay the loans on time. Keep clean accounting ledgers and try to keep your corporate credit rating in the range of 70 to 80 (excellent).
8. Repeat this process with larger loans to build your corporate credit.

Tips & Warnings

• Once you’ve gained a foothold in corporate credit by achieving and repaying a number of loans, expand slowly and steadily. Don’t overextend.
• Be cautious about which employees in your company have access to your company credit. Monitor everyone in your company to ensure that associates use their credit privileges prudently.
• Consult other entrepreneurs in your industry to find out the best loan agencies to work with. Industry referrals are typically better than general recommendations.
• Use the spending privileges afforded by your corporate credit to further the interest of your business. For instance, use the miles that you accumulate on your corporate card to fly VIP clients or get discounts on cross-marketed office supplies.
• Never make your corporate credit vulnerable during its first few months of existence. Budget your revenue stream so you don’t bite off more than you can chew, and incorporate finance charges into your semiannual budgets.