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If you are starting a business, you will soon find that one of the comforts of a business that is well set-up is that you don’t need good credit to get financing or a business credit card; bad personal credit does not affect your Paydex score, as business credit is an entity that is entirely separate from your personal credit. As long as you have taken the necessary steps to separate the two, you can rest comfortably knowing that the two credit worlds do not have to collide.
Business credit starts with the formation of a business entity; most likely, this will be a c-corp or an LLC. C-corps and LLC’s both have different properties that make them advantageous to different circumstances; a C-corp, for example, is ideal for larger, more long-term businesses that may want to go public one day, while LLC’s offer a lot of ease and flexibility of use. It is best to discuss this with a business colleague or a legal professional before you decide which way to go. The corporation or LLC will need to be registered with the IRS so that you can have an Employer Identification Number (EIN), and then you can register your business with Dun & Bradstreet, Experian, or one of the other business credit reporting bureaus. The business credit that you will have begun building will allow you to to be eligible for a loan and a business credit card.
Bad personal credit, at this point, will no longer adversely affect your Paydex score. Because it is based exclusively on the performance of the business, personal credit will not affect your chances of getting a business loan. The tricky part is initial, but once it is set up you will have access to many advantages that could not be conferred through a sole proprietorship.
