Great Information for Business Owners Directly From Entrepreneur

The following article comes directly from Entrepreneur and contains some very valuable information regarding business.

As an entrepreneur, did you know you have a unique opportunity to build, maintain and acquire credit both individually and as a business owner? That's good news if you're trying to build and grow a company because you won't have to rely solely on your personal to do that.

As a member of the business industry, it's been my experience that fewer than 10 percent of all entrepreneurs know about or truly understand how business credit is established and tracked-and how it affects their lives and businesses.

So let's first take a look at how personal credit differs from business credit. Then we'll discuss some steps you can take to build business.

At the point an individual with a social security number accepts their first job or applies for their first credit card, a credit profile is started with the personal reporting agencies. This profile, otherwise known as a credit report, is added to with every credit inquiry, credit application submitted, change of address and job change.

The information is typically reported to the credit bureaus by those who are issuing credit. Eventually, the Report becomes a statement of an individual's ability to pay back a debt.

In some cases, the same is true for businesses. When a business issues another it's referred to as trade credit. Trade, the single largest source of lending in the world.

Information about trade credit transactions is gathered by the bureaus to create your business credit report using your business name, address and federal tax identification number (FIN), also known as an employer identification number (EIN), which you get from the IRS.

The bureaus use this compiled data to generate a report about your company's business transactions. In many cases, those issuing credit to you will rely on your report to determine if they want to grant you and how much credit they'll give.

The major business credit bureaus that compile and provide copies of the reports are:

• Dun & Bradstreet
• Experian Business
• Equifax Business
• Business Credit USA

Unfortunately, because the information provided to the bureaus is sent in voluntarily--no business is required to send it in--the bureaus may never receive all or even any information about your transactions. In fact, you could go for years racking up without any of it being reported to the credit bureaus.

Establishing Business Credit

Let's start by talking about your business credit score. Scores range on a scale from 0 to 100 with 75 or more considered an excellent rating. Personal scores, on the other hand, range from 300 to 850 with a score of 680 or high considered excellent.

It's important to note that there are many factors that affect a credit score; it's based on more than just whether you pay your bills on time. Your score can be affected by the amount of available credit you have on bank lines of credit and credit cards, the length of time you've had a credit profile, the number of inquiries made on your credit profile and more.

The mistake many business owners make is using their personal information to apply for leases and loans. By doing so, they risk having a lower personal credit score.
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