Building Business Credit as a New Burbank Business: A Complete Guide

Building Business Credit as a New Burbank Business

Starting a new business in Burbank, California, is an exciting journey filled with opportunities and challenges. One crucial aspect of ensuring your business thrives is building a strong business credit profile. In this article, we'll walk you through the steps necessary to establish business credit as a new venture in Burbank, highlighting local resources and specific California rules to keep in mind along the way.

Why Is Business Credit Important?

Establishing business credit is essential for several reasons:

• Access to Capital: Having good credit can help you secure loans and lines of credit with favorable terms.
• Better Insurance Rates: Insurers may offer lower premiums for businesses with solid credit profiles.
• Improved Supplier Relationships: Suppliers may be more willing to extend credit to businesses with a strong credit history.

Understanding this importance is the first step in setting your Burbank business up for success.

Steps to Build Business Credit

1. Choose the Right Business Structure
   The first step to building business credit is to choose a suitable business structure. You may want to consider forming an LLC or corporation, as these structures separate your personal and business finances, protecting your assets.

   • Advantages of LLCs and Corporations:
     • Protects personal assets from business liabilities.
     • Often viewed more favorably by lenders and creditors.

2. Obtain an Employer Identification Number (EIN)
   An EIN acts as your business's Social Security number and is essential for opening business accounts and filing taxes. You can obtain your EIN through the IRS website with Form SS-4.

3. Open a Business Bank Account
   Open a dedicated business bank account to help keep your business and personal finances separate. Look for banks in the Burbank area that offer business accounts with minimal fees, such as those at the Burbank Community Bank or larger banks with local branches like Chase or Wells Fargo.

4. Establish Trade Lines with Suppliers
   Establishing trade lines with suppliers can help you build your credit. Look into local suppliers or businesses in Toluca Lake or Glendale who offer credit terms. Ensure they report to credit bureaus, as this will positively impact your business credit profile.

5. Get a Business Credit Card
   Applying for a business credit card can further establish your credit history. Make sure to choose a card that reports to credit bureaus and pay off your balance in full each month. Local credit unions may offer favorable options for new businesses.

6. Monitor Your Credit Reports
   Regularly check your business credit reports from Dun & Bradstreet, Experian, and Equifax. This will allow you to understand your business's credit standing and identify any discrepancies that may impact your score.

Understanding California-Specific Tax Rules

In California, it's essential to comply with local tax regulations as you build your business. Here are some key points to remember:

• Franchise Tax Board: All businesses in California must pay an annual minimum franchise tax (currently $800) regardless of income.
• California Form 540: If your business generates income, you may need to report it using this form, particularly if you're a sole proprietor.
• CA Payroll Tax DE-9: If you have employees, ensure you are familiar with California's payroll tax requirements, including the DE-9 form that reports employee wages and taxes to the state.

Local Resources for Building Business Credit

Being in Burbank offers unique opportunities to access local resources that can help you build your business credit:

• Burbank Chamber of Commerce: Provides networking opportunities and workshops that can help you connect with local businesses and understand credit-building strategies.
• Small Business Development Center (SBDC) Los Angeles Region: Offers free consulting and resources to help you navigate small business finance and credit.
• Local Banks and Credit Unions: Such as Los Angeles Federal Credit Union, which may have tailored offerings for new businesses in the area.

Common Mistakes to Avoid

• Mixing Personal and Business Finances: Always keep your business expenses separate to protect personal assets and simplify your accounting.
• Ignoring Your Credit Score: Many new business owners neglect their credit score, which can lead to missed opportunities for funding.
• Not Building Relationships: Networking is crucial. Avoid isolating yourself; local meetups and business events in Studio City and North Hollywood can provide valuable connections.

Frequently Asked Questions

1. How long does it take to build business credit?

Building business credit can take anywhere from six months to several years, depending on your payment history and credit utilization ratio. Consistency and responsibility in managing credit accounts play a crucial role in this timeframe.

2. Can I use my personal credit to start my business?

While you can use personal credit to fund your business initially, it's essential to establish business credit as soon as possible. This separation protects your personal assets and enhances your business's credibility.

3. What credit scores do lenders need?

Most lenders will check your business credit scores, primarily from Dun & Bradstreet and Experian. A score of 80 or higher on the PAYDEX scale is generally considered favorable for obtaining business financing.

4. Are there any specific loans for businesses in Burbank?

Yes, local community banks and credit unions often offer tailored loan products for businesses in Burbank. Consider reaching out to institutions like Citizens Business Bank to inquire about specific offerings.

5. What documents do I need to open a business bank account?

Typically, banks will require your EIN, business formation documents, and any licenses or permits needed to operate in Burbank. It's best to check with the bank for their specific requirements.

6. Should I hire a CPA for help with business credit?

Hiring a CPA, like those at Calculus Tax, can be beneficial, as they can provide tailored advice on building business credit, compliance with tax regulations, and financial planning.

Conclusion

Building business credit is a fundamental aspect of establishing a successful enterprise in Burbank, California. By following these steps and remaining diligent in managing your finances, you can create a robust credit profile that opens doors to future opportunities. Remember, local resources and professional guidance from a CPA can offer invaluable insights as you embark on this journey.

Tags

• burbank
• small business
• tax planning
• business credit
• accounting

Read Time

~7 minutes

By taking these actionable steps toward establishing business credit, your new venture in Burbank can thrive and leverage the financial support available to it.