You opened your practice because you’re great with clients, not because you love accounting. So there may be some simple things you haven’t thought of that can help grow your business. If you ever want to expand your practice or take out a loan, you should follow these three simple steps to start building a credit history.
Step 1:
Get a business credit card. Many small business owners cover expenses with personal credit cards and never bother to switch. It’s convenient at first but it can be a hassle for accounting and it doesn’t help your business establish a credit history. If it’s your first business credit card, you’ll have to start out with a low credit limit, but that’s OK. It’ll take some time anyway to move all your company expenses off of your personal credit card.
Step 2:
Charge your business’ bills to your new credit card. Start building a credit history for your business by charging those frequent, reoccurring bills like your phone, lease, and insurance bill. The simplest way to remember to do this is through automatic billing. Just set it and forget it. Whatever you can charge, do it; just make sure you cover the payments. Avoid writing a check or paying with a debit card whenever possible because these are missed opportunities to prove your business is credit worthy. The more bills you can pay with your new business card, the faster your credit limit and credit score will improve.
Step 3:
Separate all your personal and business expenses. Once you grow your credit limit, you’ll be able to charge all your business expenses to this account, including big ticket items like new office furniture or a new computer. Charge all or as many business expenses as you can to this card. Just be sure to pay off these large balances every month. Paying off larger balances will cause your business’ credit score to grow much faster, and that’s when you start to see real benefits to your business: business loans will be easier to acquire and you’ll be able to negotiate better rates on interest.
In Summary:
If you’re still using your personal credit card to fund your practice, consider applying for a small business credit card to build your company’s credit. If you have a business credit card but you’re still using your personal card as well, take a moment to see what expenses will transition immediately. Then come up with a plan for gradually moving all your company expenses off your personal credit card.
