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Establishing a Strong Business Credit in Texas

Business Credit in Texas

Many Houston entrepreneurs consider themselves to be extensions of their companies. It's an innate instinct, especially since many firms begin with an idea developed through talent and dedication. However, failing to keep your personal and business financial affairs apart as an owner is an error that might lose you and your business money. That's where business credit comes in.

They help establish a barrier against some financial and tax liabilities and help prove that you and your company are independent legal entities. Plus, they present numerous opportunities for your business to borrow large sums of money and build a healthy rapport with different vendors. So how can you establish one?

Now, we know that you work hard for your business. So, try not to let the idea of creating one overwhelm you. This article will help you understand the importance of establishing a business credit, the steps you can take to develop a strong one, and how you can leverage PrimeWay’s resources to build your business credit. Let's dive in.

Understanding the Importance of Business Credit

Research from Nav shows that 82% of small business owners need help understanding the importance of their company's credit score. Hence, you'll need to understand the importance of business credit to run a successful business. Below are some of the reasons to establish business credit:

  • Make obtaining funding more accessible and faster: When you request financing from a lender, that lender could check your business's credit rating. A strong business credit rating will show the lender that your business will make obligations on time, making it simpler and faster for you to be approved. 
  • Get better repayment terms: A good company credit score can also assist you in obtaining trade credit and negotiating preferable repayment options from your suppliers and vendors. Also, they will consider you a reliable customer if your firm has a high credit score, and they might offer you more flexible payment terms. 
  • Protect personal credit: Having business credit also helps safeguard your personal credit and lets lenders know the difference between the two. With business credit, your business's debts will be listed on its credit reports, protecting your credit score from any financial difficulties your company may experience.
How Business Owners Build Credit in Houston

Steps to Establish Business Credit for Your Business

Building credit for a business requires more effort and can be more complex than doing it for a personal account. However, you can take several crucial steps to make it much more manageable. Below are some of the steps you can take:

Establish Your Business

Start by creating a legal entity for your firm, such as a corporation, partnership, limited liability company, or sole proprietorship. Establishing a formal name for your firm and a business phone number will increase its credibility with customers and the authorities. Always seek advice from your lawyer or accountant to determine which legal business categorization is most appropriate for your needs. 

Obtaining credit for your company and its employer identification number (EIN) is often simpler if you register it as a corporation or an LLC. Sole proprietorships often carry the risk of mixing your personal and commercial credit histories.How to Build Business Credit in Texas

Obtain an EIN for Your Business

Your Employer Identification Number, or EIN, acts like a Social Security Number for your company. It serves as your company's identification to the IRS. You'll need your EIN to pay business taxes year-round, open a business bank account, and submit license applications. It's simple and free to register for an EIN. Visit the IRS website to see if you qualify and to file an application to begin the process.

Create Accounts With Suppliers Who Provide Payment History Information

Work with vendors who accept net-30 or net-60 credit terms, and notify business credit reporting bureaus of your payments. The terms "net-30" and "net-60" refer to the time frames of 30 and 60 days, respectively, that you have to pay the billed amount in full. Build credit with vendors who submit payment information to multiple business credit reporting companies.

Open a Business Bank Account

Opening a business bank account will enable you to establish a rapport with a banking institution that could be useful if you want a small business loan to expand your operations. With this business account, you can apply for a business credit card that could allow you to earn travel rewards or cash back on the regular spending of your firm.

Make Your Payments on Time

You must make all your payments on time to establish strong company credit. Specific business ratings are entirely contingent on your business's payment record. Building a solid credit score for your company may be difficult or impossible if you have numerous late payments on your business credit record. Alternatively, your score may increase if you have a good payment history to your company credit record.

Pay Attention to Credit Use

Credit use is a significant factor in credit score development. Similar to personal credit cards, corporate credit cards have a specified usage policy so you can raise your credit score as much as possible. As a small business owner, you should spend at most 30% of the credit limit. This demonstrates to lenders your sound financial management and ability to pay more than the minimum amount due monthly.

Establishing a Strong Business Credit in Texas

Understand the importance of establishing business credit. Let PrimeWay's knowledgeable resources help you build your business credit with our easy-to-follow steps.

Leveraging PrimeWay’s Resources to Build Your Business Credit

For 86 years, PrimeWay Financial Credit Union has operated through economic ups and downs. We approach business investments cautiously and well-balanced because we take our responsibility as your financial stewards very seriously. Getting the funding you require should be easy and inexpensive. Our selection of business credit services provides the information. Financing you need at a cost you can afford allows your company to grow.

With our business line of credit, you get to set the terms for your loan. The low-interest rates make borrowing inexpensive for your business, and you only pay interest on the amount you borrow. This way, you can grow your business credit rating at your own pace.

Monitoring and Maintaining Your Business Credit

Keep in mind that your company's credit score is an important asset. Protect it like you would your data, physical assets, patents, and even your child! Your chances for growth and profitability will be better if your company's credit history has any blemishes.

Credit errors can damage your company's credit, making borrowing money more challenging and expensive. Therefore, make it a point to verify the accuracy of your company's credit reports several times annually. If you discover one, you can try to have it fixed by raising an inquiry with the relevant business credit agency.

At PrimeWay Federal Credit Union, we want to empower your small business to live to its full potential. Our job is to be there for you whenever you require the resources, direction, or assistance. Moreover, to continue progressing in the right direction. Contact us today, and let us help you build your business credit today.

Author Bio

Laurie Masera Garza

Laurie is a digital marketing and social media maven who has more than 15 years of interactive multi-media experience under her belt. When she is not rocking the social media atmosphere, Laurie loves to find Houston’s hidden dining gems, but ask her about tacos. She loves tacos. In her spare time, Laurie loves creating, whether its art or memories.

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