Having access to loans to fund your business is one of the top priorities of a business owner. But with business credit, getting approved for business loans can be easier. Here are all you need if you are operating in South Carolina and want to build business credit. 

There are several steps you need to take when building business credit, but first, let’s briefly define business credit and why you need to build it for your small business.

What is business credit?

Business credit is the capability of a company to take out a loan as an independent legal institution. This separates your business credit transactions and reports from your personal credit, making qualifying for a business loan easier.

What are the benefits of having business credit?

Knowing how to build business credit in South Carolina is beneficial for your business for the following reasons:

1. It allows you to have access to business loans easier.

2. It has more credit limits allowing you to get more funds and supplies for your business operations and growth.

3. It enables you to avail of premium insurance for your business.

4. It gives more opportunities for your business to enter partnerships or other forms of contact with other organizations.

5. It may allow you to get a loan despite having bad personal credit.

6. It makes your business more credible and ensures potential partners and customers that you are trustworthy. Business credit is available to the public, unlike personal credit.

Now that you have more understanding of business credit and why it is important for your company, here are the steps on how to build business credit.

Please note that the steps you will be reading below may apply to building business credit in other states. But may limit some business requirements and fees to the State of South Carolina only.

 

Steps on How to Build Business Credit in South Carolina

1. Register your business.

Before you can start building business credit, it is crucial to register your business in the state of South Carolina.

Aside from deciding on a legal business name and making sure it is unique, it is also important to decide what type of business entity you prefer. Sole proprietorship, LLP, LLC, or Corporation? The type of entity you choose determines how you file taxes and your business’s ability to raise money. Each also has its pros and cons.

• Sole proprietorships lets you have full control of your business. This type of structure does not create a separate entity for your business. Instead, you are treated legally as one. This means that you will be held accountable for debts and lawsuits that your business may encounter.
• LLP is for partnerships or businesses with multiple owners. This type of business protects each partner from any lawsuits or debts of their partners.
• LLC protects you from any liabilities your business may face. This means your personal assets, like your house or personal savings accounts, won’t be at risk if your LLC goes bankrupt or faces lawsuits. In addition, LLC members who are considered self-employed will have to pay self-employment tax instead of corporate tax, which is more expensive.
• A corporation or Corp, on the other hand, has the strongest protection against debts and lawsuits that the company may face. It also has the greatest advantage in raising money because it can get funds through selling stocks. However, the cost to form a corporation and its taxes is much higher than the other types of business structures.

In building business credit, choosing either LLP, LLC, or Corp structure is recommended, as they create a separate legal entity for your business. In addition, these business structures increase credit worthiness of a business for many lenders. Moreover, it makes business credit tracking easier. So, you are most likely to get approved with LLC, LLP, or Corp than as a sole proprietorship.

2. Get a Federal EIN 

The Federal Employer Identification Number is required for businesses registered as LLC, LLP, or Corp. This number is used for tax filing and is required for many business transactions, such as opening a business bank account. FEIN is like the SSN for businesses.

Sole proprietors use their SSNs when filing for their business and taxes.

The Federal EIN is obtained for free from the IRS (Internal revenue Service) online or by filling out this form and mailing it to IRS. 

Step 3. Get a Local Business License

South Carolina has no statewide license for businesses. Still, most municipalities (county, town, city) require a business license. You may refer to this page for inquiries about your local government’s required permits, licenses, and fees.

You can make steps 1,2 and 3 easier by using the Business requirement Tool of Business Credit Machine, a business credit builder software. It gives you a good guide on obtaining all the business requirements to help build credit, including links to apply and fees. You may also add data that you may feel necessary.

Step 4. Open a business bank account

Opening a business bank account allows you to easily separate business financial transactions from personal transactions. This is useful to have recorded cashflows of your business’ money which many lenders check when evaluating your business credit, stability, and ability to pay. 

Obtaining a business bank account also adds credibility and professionalism. This is helpful for lenders to have more confidence to transact business with you.

Step 5. Obtain a credit card for your business

A business credit card is great for building a credit history specifically for your business, separate from your personal credit history. This is useful for evaluating your company’s creditworthiness by credit bureaus and creditors.

There are many benefits of having business credit cards, such as:

1. The higher credit limit would allow you to buy more business supplies.
2. Easy tracking of your business expenses from personal expenses. This helps manage your business finances more efficiently.
3. Take advantage of low-interest rates, rewards, cashback, and other incentives.
4. Easy monitoring of your credit utilization ratio is important in keeping a good business credit score.

Step 6. Establishing Credit Lines 

Another great way to build a business credit history is to use credit lines like Net-30. This credit allows you to get supplies or services and pay them within 30 days without the upfront cost. Some also offer, Net-20, Net-45, or Net-60. 

To find reputable traders, vendors, and other forms of credit, you may use Business Credit Machine. It has a wide list of creditors you can apply for credit, including their websites and other useful information.

Here’s a glimpse of Business Credit Machine Creditors database.

If you wish to add more lenders that are not on the list, you may do so by clicking the Menu, then scrolling down to My Setting and BCM Setting then choosing where to save it, Tier 1 or Tier 2.

Step 7. Monitor Business Credit Health

Your business credit reports are the main reason for building business credit. It contains information about your credit history and creditworthiness, which the lenders will evaluate to decide whether to approve your business loans and what interest rate to charge. 

Regularly monitoring your credit reports while building business credit helps ensure that data is complete and accurate. For instance, whether the lender reports to business credit bureaus and not to personal credit agencies. Or that the payment dates are correct. Or no errors in your file that may reduce your business credit score.

It is important to contact the creditor or file a dispute with the credit bureaus once you discover errors in your credit reports, as this can harm your business credit.

Suppose you have the Business Credit Machine Software. In that case, you can easily monitor your business credit reports by utilizing its Item Center. See the image below.

Aside from that, you can use the Credit Scores tab to monitor your credit scores and the Items tab to see negative and positive items detected from the extracted credit reports.

Tips:

Pay your bills on or before the due date to ensure you build good credit scores. Delayed payments can drastically reduce credit scores, even if it is just for a day. It also stays for seven years, discouraging lenders from approving your loan. 

Also, keep your business credit utilization low, 30% or below. Lenders may question your business stability if you have a high business credit utilization rate.

Building business credit is vital for every company. It is a part of entrepreneurship that should be considered seriously. Aside from building business credit for your own company, Business Credit Machine is also used by many business credit builder specialists to make their work easier and faster. 

Business Credit Machine is an all-in-one business credit builder software that does not only build credit but also works as a CRM program, marketing program, and sales program. Features that are very useful for running and growing a business. Check out BCM – The Best Business Credit Builder Software to learn more about its amazing features.

Now that you have a good understanding of how to build business credit in Georgia, here are a few more articles about credit building that you may find helpful.

Building business credit for LLC makes it easier and less expensive to get the funds and supplies you need to grow your business. If you’re looking for ways to build your business credit, here is a step-by-step guide you can follow.

First, it is important to understand that operating a business as a sole proprietorship does not legally separate you, as the business owner, from your business. This means that your personal and business transactions will be reflected in your credit report. This can limit your business from acquiring more capital and can drag your credit scores when the business suffers from debt. 

Therefore, it is recommended to separate your business credit from your personal account. You can do this by registering your business with the right business structure. As an LLC, LLP, or corporation. For this article, we will focus on how to build business credit for LLC, the best entity for small businesses. 

Once you have registered your business as an LLC, you are ready to start building your business credit. Here are the things you can do.

1. Obtain an EIN.

To start building your credit, you need to get EIN for your business. This is a federal tax identification number that served as a security number for a business. EIN is required for tax filings and to open a business bank account for LLC.

2. Open a Credit Card for your Business.

A good and easy way on how to build business credit for LLC is getting a business credit card. It does not require employees or an office and most business owners can qualify for it as long as the owner has good credit. 

A business credit card is helpful to keep personal and business expenses separate. Therefore, it’s important to use business credit cards only and for all your business transactions. Do not use it for your personal expenses as it can only make tracking difficult.

Aside from being a stepping stone to building business credit, getting a credit card for business has many advantages. You can get cash backs, travel rewards, or welcome bonuses. Moreover, business credit cards have higher credit limits than personal credit cards. And some credit card issues offer low introductory APR periods. This allows you to make large purchases and build business credit without worrying about high-interest rates.

You can get one or more credit cards for your business. However, avoid getting many business credit cards in a short period of time as this can negatively impact your credit score. 

3. Establish credit with vendors who report to credit bureaus.

Get your supplies from vendors who report to business credit agencies; Dun & Bradstreet, Experian Business, and Equifax Business. Take note of “vendors who report to business credit agencies” as some do not and this is one of the most common mistakes businesses make. It is best to ask about this first before getting an account with vendors. You don’t want to waste money, time, and opportunity to build business credit for your LLC.  

You can get Net-15 or Net-30 days accounts on vendors. This means getting the products, services, or supplies you need to be paid for within 15 or 30 days. 

4. Keep your credit utilization ratio (CUR) low.

CUR is the percentage of the amount you borrowed divided by your total credit limit. It is a key factor in building business credit as it signifies your company’s financial strength. Having high credit utilization ratio can drastically result in low credit scores as it indicates you are sucking up your credit limit to meet your needs. To build a good business credit score, it is recommended to keep the CUR under 30%.

5. Pay your bills on time.

Credit history is the most important factor in your credit reports. It influences your credit score and tells vendors your capacity and sense of responsibility in paying loans. Always pay on time and in full amount to avoid a negative impact on your business credit reports. Even just a few days of late payments will be reflected on credit reports. For instance, 2 days late payment will mark 2 DBT, which means 2 days beyond terms, on your credit history. 

6. Monitor your credit score.

Building credit can take several months to a few years. Monitoring your credit score can alert you to any problems that may occur. For instance, accounts that don’t belong to you or late payment remarks for loans that have already been paid. So, you can make the necessary corrections by contacting creditors or filing a dispute with credit bureaus. You can use credit repair software to monitor your credit and make fixing credit easier.

If you are building business credit for your LLC or for your clients as a business, having a business credit builder software is handy to make your work easier. Check out Business Credit Machine to learn more.