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When you are starting a business and trying to hunt down small business loans, bad credit is something that you do not want to be worried about, especially in today’s challenging economic times. However, the easiest way to avoid bad credit is rather simply to start your business off on the right foot with good credit. This article will explain the basic nature of business credit, and what you can do to get and maintain a high Paydex score.

Business credit works on a numerical similar to FICO, except based on a scale of 0-100 (with 75 and above being considered excellent. Business credit is based on the assets, holding and profitability of fictitious business entities, not on the actions of individual human beings. In order to set up a business entity, you will need to check with your business colleagues and legal advisors to find out which sort of incorporation is right for you. The business must then be filed with the IRS and assigned an EIN number, and then you will need to register the business with Dun & Bradstreet to begin the process of building credit.

With this done, you are going to want to prepare yourself for being able to get small business loans. Bad credit is an easy obstacle to avoid for these purposes. Begin by setting up some merchant trade lines, and applying for some small business credit cards. You can build credit similarly to the way you would build personal credit, buy paying off standard loans.

Unlike personal credit, business credit is not solely based upon the timely repayment of loans; rather it is based mostly on the profitability of your enterprise. This will take some time to cultivate, but if you follow the preceding steps, you will be able to have at least a reasonable amount of credit built for when it comes time to take your business to the next level and finance something big.

This Business article was written by Mark Karavan on 2/7/2010