Can Your Payroll and Accounting Business Build Credit?

Having good credit is one of the most valuable assets that you can possess as a business owner. Your credit score has a direct impact on your ability to secure loans that help you to get your business off the ground. According to Nerd Wallet, 45% of all business owners who are turned down for loans are denied due to low credit scores. For this reason, you should make it a priority to build your business’s credit rating. However, does the same principle apply if you own payroll or an accounting business? Can these types of businesses build credit?

Accounting and payroll businesses can build credit, just like many other types of businesses. Although payroll and accounting businesses you do not need credit for purchasing inventory, there are a few reasons that having a good credit rating would benefit your payroll or accounting business, such as the ability to purchase office supplies on credit; obtaining a business credit card; being able to secure a good location for your business, or purchasing office equipment.

 In this article, we are going to answer the question of why establishing and maintaining a good credit rating could be especially beneficial to your payroll or your accounting business, such as the ability to drastically increase your chances of getting approved for a business loan. I will also include several tips on how to build, and maintain a good credit rating for your accounting or payroll business.

Why Is It Important for Your Payroll or Accounting Business to Build Credit?

As I have previously mentioned, having a good credit rating is essential to the success of any small business. The same applies to your payroll or accounting business. While it may not be necessary for this type of business to keep inventory on hand, there AR several reasons why your payroll or accounting business needs to have good credit. Whether you need to secure a business loan to help get yourself established, get approved for a great business location, apply for a business credit card for expenses such as taking clients out to dinner or purchasing office equipment, your business will have to have a good credit rating.

Perhaps the most important reason for having a good credit rating for your payroll or accounting business is having the ability to secure business loans to help get your business started. Per the website nav.com, a report recently published by the American Dream Gap Report found that small businesses are 41% more likely to get approved for small business loans when they have a good credit rating. According to these figures, having a bad business credit rating will cut your chances of being able to establish your payroll or accounting business practically in half.

While some smaller payroll or accounting businesses are based out of the owner’s home, many of them have independent locations. If you want to be able to secure a location that gives your business a chance to succeed, you must have a good credit rating to get approved for a lease. We live in a world where real estate now comes at a premium, and having a good business credit rating can make the difference between being able to secure a good location for your business, and having to run your payroll or accounting business from a less desirable location.

Whether you want to take prospective clients out to dinner or lunch, or if you want to have the ability to make large purchases for your business without having to dip into your liquid assets, having a business credit card is not only a useful tool, but it is an essential one as well. If you want to be able to secure one of the better business credit cards that have high credit limits (or those with no credit limit) and low-interest rates, your business is going to have to have a good credit rating. This makes establishing and building credit for your payroll or accounting business an important step along the path to success.

Here are ways you can get money to start a payroll & accounting business.

What Are Some of the Most Important Ways That Your Payroll or  Accounting Business Can Build Credit?

 As we have already discussed, several reasons building a good business credit rating can be beneficial to the success of your payroll or accounting business. Now, it is time to discuss many of the ways that you can build credit for your business. Here are eight of the most effective ways to build your payroll or your accounting business’s credit rating:

• Put your business on the map. It’s hard to establish good business credit if your business isn’t properly established. A few simple ways to accomplish this hard to register your business; get an official business line and phone number, and set up a bank account for your business.
• Establish and maintain vendor credit. While you won’t be required to keep inventory on hand, establishing a good working relationship with your office supply vendors is a valuable asset to your business and a step in the right direction towards building a good business credit rating.
• Obtain an Employer Identification Number. This stuff works in conjunction with the first step, which is making sure that your business is on the map. Having an employer identification number makes your business official. Besides, you will need this number to open your business bank account.
• Pay on time all the time. This is the most important step in building and maintaining a good credit rating, whether it is for personal credit or business credit. Making payments on time is the biggest factor in your business’s credit rating. This shows that you are capable of effectively managing your payroll or accounting business’s finances.
• Open a business credit card. This is one of the easiest steps that you can take regarding establishing a good credit rating for your business. Make sure that your business credit card regularly reports to the major credit bureaus. This will ensure that you are building credit for your business. It’s important to remember that you don’t overextend yourself with these business credit cards.
• Get incorporated. This is a necessary step can you to build a good credit rating for your payroll or your accounting business. You will need to incorporate your business to get an Employer Identification Number. Then, you can open a business bank account and start effectively build in your business credit. Besides, becoming Incorporated helps to separate your credit profile from your business credit profile.
• Separate business and personal expenses. While this may seem fairly obvious, separating your business and your expenses ensures that you are paying your business expenses from money acquired through your business, and not through your funds. This will also give you a better idea as to if your business is capable of sustaining itself.
• Monitor your credit report regularly. This is the best way to ensure that your payments are being correctly reported to the major credit bureaus, as well as making yourself aware of any fraudulent activity that may currently be affecting your ability to build credit for your payroll or accounting business.

Conclusion

 Establishing and building a good credit rating is essential to the success of your payroll or your accounting business. Without a good business credit rating, your ability to secure a business loan will be severely decreased. This can make it impossible to get your business off the ground when you are just starting. Whether you need to get a loan for your business; find a great location for your business; or obtaining a business credit card to make purchases, having a good credit rating is a necessity. By following the eight steps to building good business credit that is listed above, you can ensure that your payroll or accounting business is on the right path to success by ensuring a bright future thanks to your positive business credit rating.

Frequently Asked Questions

What is the best business credit card that you can get for your payroll or accounting business?
The consensus when it comes to the best business credit card available is that the American Express business card is the best there is, bar none. Two of the major perks to having this card are that you will receive a $250 credit upon making $3,000 worth of purchases within your first three months of having your card, and they also offer a 2% cash back bonus on eligible purchases. Both of these features can be beneficial if you have to make large purchases when you are first starting your business.

What is the average interest rate on a small business loan?
A small business loan can provide you with an infusion of cash that will help you to get your business off of the ground. Many of these loans offer amounts between $10,000 and 1 million dollars. Many factors can determine the interest rate that will be given to you when you secure a business loan. The most significant factor is your credit rating. With that said, you can secure a business loan with an annual percentage rate of 1.2% if your business has a great credit rating.

To learn more on how to plan your own payroll and accounting business click here!

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