- Hi everyone, I'm attorney Aiden Durham
with 180 Law Co. in Colorado,
and you're watching All Up In Yo' Business.
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(air whooshing)
In this episode of All Up In Yo' Business,
I'm gonna give you guys some tips
on getting a credit card
and establishing credit for your new business.
But first, don't forget to like subscribe and share
and check the description for links
to additional information and resources
such as my online tool that allows you
to set up a new business online in any state,
or to download my free guide
on "How To Pay Yourself In A Single Member LLC."
So when we're talking credit cards
and credit for your new business,
it's always going to start with the question
of your personal credit.
You probably already know,
but there are three major credit reporting bureaus
for personal credit,
they are Equifax, TransUnion, and Experian.
If you have auto loans, personal credit cards,
a mortgage, something like that
then you've probably already started building your credit
and your credit score.
Factors like the number of credit accounts,
the types of accounts,
how much credit is used
compared to how much is available,
the length of your credit history and your payment history
all play into your credit score
and how lenders are going to evaluate
your credit worthiness.
But it's a different situation
when it comes to business credit.
Like personal credit, there are business credit bureaus,
like in Experian Business, Equifax Business,
and Dun and Bradstreet,
which is the primary credit reporting agency
for business credit.
Getting business credit is going to be a lot easier
if you have personal, good personal credit.
And when I say good credit,
I generally mean somewhere in the 700s or better.
But don't worry
there are ways to get credit for your business
even if you don't have good credit personally.
If you have good personal credit,
lenders are typically gonna make lending decisions
off of your personal credit score and credit limits.
They're gonna check your credit score and credit history,
but in a lot of cases the business credit won't be reported
on your personal credit, unless you default on the payments.
If your business is very new
you may still be required to personally guarantee that debt
or the credit card, even if you have good credit too.
So getting business credit
is usually going to be an easy process
if you have good personal credit, like I said,
but you can still get credit for your business
even if you have bad personal credit,
it's just gonna require a little extra legwork
and may take a bit longer.
The first step in establishing business credit is to
set up a business.
I know, groundbreaking, right?
But seriously, if you are trying to obtain credit
for something separate from yourself personally,
then you need to have a business,
that is separate from yourself personally.
This can be an LLC or a corporation,
that part doesn't particularly matter.
So you'll file either the articles of organization
or articles of incorporation
with the Secretary of State's office in your state.
Then you're gonna wanna get an EIN
or employer identification number from the IRS.
This is super important in getting credit for your business.
The EIN is like the social security number
for your business,
and it's gonna be used in a very similar way.
You'll also wanna draw up the operating agreement or bylaws
for your LLC or corporation.
A lot of banks or financial institutions
are gonna wanna see copies of these documents
before they'll establish any kind of account
for your business.
Not always, but most.
It's also a good idea to have everything else
for your business official.
So set up your website, social media accounts,
dedicated email addresses, phone numbers, and so on.
This may not always play a huge role,
but it's gonna help you in establishing business credit,
if you can demonstrate that you're actually operating
a real legit business.
Once that's all set up,
you're gonna wanna open a business checking account.
Now I recommend opening a checking account
with whichever bank or institution
you wanna get a credit card through.
So if you're looking to get a credit card through Chase,
open a business checking account with Chase.
Or if you have a long history with a certain bank
for your personal accounts,
then look into opening a business account with them.
If you have bad credit,
then the best thing you can do is leverage
any existing relationships you have personally with banks.
A lot of banks are gonna offer some kind of credit
right off the bat when opening a business checking account.
If they do then take it,
they've already evaluated you and run your credit,
and this is your best opportunity
to start building credit for your business.
If you don't get those offers right away,
don't get too discouraged.
Some banks wanna see deposits and transactions
on the account before they start offering credit.
You can also explore other lending options,
PayPal and Square for example,
offer small business loans to their customers.
I mean if you're gonna be accepting online payments
for your business anyway,
you can use one of these payment platforms
like Square or PayPal,
and once they start seeing consistent transactions
on the accounts and deposits,
you may be eligible for those loans.
The super important thing here
is to make sure you're opening business accounts though,
with PayPal and Square
and that they're tied to your business's EIN.
You do not want to use your personal accounts
if you're trying to establish business credit.
Finally, if getting a credit card or a loan
through a financial institution isn't working for you,
you can begin establishing credit for your business
through vendor accounts,
but only if the vendor is going to report your payments
to the business credit reporting bureaus.
Some companies like Quill and Staples, for example,
allow you to purchase supplies on credit and your payments,
they get reported to the credit bureaus.
Once you're able to establish some kind of credit
regardless of what it is,
the number one most important thing moving forward
is to make all of your payments on time.
This goes for your personal and business credit.
Make sure that you continue
working to improve your personal credit,
because that's still going to be the biggest factor
in getting a credit card for your business.
As you start establishing that credit history
for your business,
you'll see the credit card and lending offers
start to pour in more regularly.
That's all for this episode folks.
Drop a comment below, let me know what you think,
and again, don't forget to check the description for links
to additional information and resources.
Thank you all so much for watching I'm Aiden Durham,
and I'll see you next time.
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