When business credit applications are made to financial institutions, the applicants may wish to consider the business credit reporting bureaus. Many lenders use these bureaus to determine if you are worthy of a business credit card or loan. A business credit report is normally made by major credit bureaus when potential credit applications are received. These reports can then be reviewed during the initial decision making stage of whether or not to provide credit to an organization. The information on a business credit report is used for credit decisions, which in turn affects the organization’s ability to obtain credit and the interest rates they pay for loans and other purchases.
In order to keep your business separate legal entity from your own personal finances, separate legal entity accounting is necessary. Most lenders use separate legal entity accounting when providing funding to new businesses. It is very important that all creditors, stock holders and joint owners on your business entity account all have separate legal entity accounts. This allows you to maintain accurate business credit scores and have separate tax information.
All business credit cards and lines of credit require the use of your Employer Identification Number (EIN). You can get this free on your IRS Form 1040-X. An EIN is required as proof that you are an individual or business, separate from your spouse, that has been authorized by your employer to use a business credit card. Your Employer Identification Number also is required to sign business financing agreements. In addition to having a separate legal entity, the IRS requires that each entity separately report its separate financial activity.
You can apply for free business credit cards from local banks, credit unions and lending companies such as BHM Financial Services, Capital One, American Express Credit Card and Chase Freedom. To apply for these accounts, you will need to complete a Free Nav Account Application (FNA). The FNA is a two-step process that requires the business owners to answer a few questions about their business, their bank, the type of credit they require and how much they want to borrow money. Business owners can borrow money up to the maximum amount allowed by their business credit cards and lines of credit.
You cannot use a business credit or lines of credit to make purchases that total more than the amount you have in your bank. If you do not repay an item on time, you can face penalty fees or the loss of points that can later be applied toward your business loans and mortgages. The amount of your penalties will depend on the item that was not repaid.
Business credit reporting bureaus can help you get better rates on your business loans, home loans, mortgages, car loans, student loans, consumer credit cards and even rent if you have a low debt to income ratio. To establish credit, you will need to find a lender who agrees to issue you a loan based on the information contained in your business accounts. In most cases, lenders will conduct a credit check that may include a review of your personal credit report. However, you can still get great rates if you have excellent credit. Lenders use a variety of different factors to determine your credit score, such as your payment history, your balance transfer history, and whether you pay your bills on time.
