Do You Need Good Credit to Start a Contracting Business?

These days, you need a credit report for lots of things. It’s not surprising that you may be expected to show your credit report when you want to apply for business financing and other things related to starting your company. There’s a difference between business credit and personal credit, and it’s important to keep them distinct. Here are a few things you should know before you start.

Keeping Business and Personal Finances Separate
Financial experts recommend that business owners do their best to keep their personal and business finances separate. There are several reasons for this, and establishing a different credit profile for the business is one of them. In the early years of your business, before you have established credit for the organization, you may occasionally have to rely on your personal credit for certain things. It’s tempting to use a better credit score to apply for personal loans or lines of credit that you can use for your business. But as your business grows, it will be harder to separate them. It’s better to do so from the beginning.

Repairing Personal Credit
You don’t necessarily have to rely on your personal credit in order to get your business running, but there are situations in which it would be good to have a better personal credit score. For example, when you go to establish a bank account for your business, they may check your credit. Business owners who have better credit scores may have more options in the kinds of accounts that they can open. One of the best things that you can do for the future of your business is to make sure that your personal credit report is accurate and as trouble-free as possible. Working to improve your personal credit might not help your business much, but it certainly won’t hurt.

Establishing a Business
Building a credit profile for your business usually starts by establishing a formal business. In most cases, if you want to apply for things like grants or funding, you’ll need to have a formal business with a license and a tax ID. You may be able to do things like open up a bank account or establish relationships with suppliers without it. But as a general rule, officially establishing your business makes it much easier to apply for loans, set up lines of credit, and more.

Applying for Business Credit
When you start applying for different types of credit for your business, it’s important to read the fine print. For new businesses, it is not uncommon for a credit card issuer or bank to require that you accept personal liability if your business is unable to make the payments. You may also see loans or other funding opportunities that do not require you to make that kind of promise. Be sure that you understand how each type of credit affects your business’s cash flow, as well.

Choosing Credit Options Wisely
When you first start a business, it’s tempting to think of credit as a great way to expand your business quickly without requiring you to save up a lot of capital. You should be careful about your use of credit, especially if your business income is unpredictable. Building a reliable credit history for your business starts by making wise decisions about when to use credit and when to look for other ways to fund your business expenses. That way, when you are ready to use credit in a way that benefits your business, you are more likely to have a report that appeals to lenders.

Credit reports and scores aren’t just for individuals. Your business will have them too. For more guidance on what you’ll need to start a contracting business, visit CSLS today!

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About CSLS

Contractors State License Service (CSLS) is the largest school in California devoted to the Construction professional. For over 23 years, CSLS has helped its students pass the exam to become licensed contractors in the State of California, licensing more students than any other school. From our main offices in Southern California, CSLS operates over 25 locations with full-service support and classrooms. We have grown to this extent by providing quality, professional services. In comparison, this provides 7 times the number of convenient locations than the second largest contractor school. Contractors State License Services is one of the only contractor schools in the state that is run by educators, not lawyers or people mostly interested in the bonding and insurance business. Contractors State License Services formerly operated under the oversight of the State of California's Bureau for Private Post Secondary and Vocational Education. As of January 1 2010, the new Bureau for Private Postsecondary Education (BPPE) came into existence replacing the BPPVE. CSLS now operates under the provisions of the California Private Postsecondary Education Act of 2009 (CPPEA), Article 4 Section 94874(f). Our Mission is simple; We can help you pass your California Contractors License Exam. Celebrating our 25th year, CSLS has helped over 120,000 students pass the California contractor licensing exam to become licensed contractors in the State of California. Additionally, we offer complete home study and online contractor’s license programs to help you pass your California contractors license exam. CSLS offers licensing classes for all types of contractor licenses, including General Engineering Contractor, General Building Contractor, Specialty Contractor, Insulation and Acoustical Contractor, Framing and Rough Carpentry Contractor, Cabinet, Millwork and Finish Carpentry Contractor, Concrete Contractor, Drywall Contractor, Electrical Contractor, Elevator Contractor, Landscaping Contractor, Warm-Air Heating, Ventilating and Air-Conditioning Contractor, and many others. For a complete list of contractor licenses, visit and tuned for more informative posts.