When you shop for small business electricity, your small business credit is a factor in getting your service set up. The unfortunate reality is, you may have to pay a deposit to start electricity service for your small business. That’s why it’s important to build small business credit. In this article, we’ll explain why you may have to pay a deposit, alternatives to pay a deposit, and how to build small business credit so you don’t have to pay a deposit.
10 Steps to Build Credit for Your Small Business
Even though we’re an electricity shopping site, credit is important to your small business for things other than just electricity purchasing.
Just like in your personal life, having good credit for your small business makes it easier and less costly for you to buy the things you need.
Here are 10 steps to establish good credit for your business.
- Incorporate your business. Even though you may be incorporated when you’re reading this, it deserves a mention. With sole proprietorships and general partnerships, the business is legally the same as the owner; therefore, there can be no separation of business credit history from personal. Incorporating a business or forming an LLC creates a business that is legally separate from the owner(s). This also protects your personal finances from your business’ debts and creditors.
- Obtain a federal tax identification number (EIN). The EIN is basically a social security number for a business. It is required on federal tax filings. You also need it to open a business bank account in the name of the corporation or LLC.
- Obtain a DUNS Number. A DUNS number (which stands for Data Universal Numbering System) is a unique 9 digit number assigned by the Dun & Bradstreet Corporation. Having an active DUNS number confirms your business is operational. Information on your business is included in an official directory listing that includes your company’s physical location, contact information, ownership, business structure, industry, employee count, aliases (“doing business as” designations), and historical financial data. If you have not yet established a DUNS number, here are the steps to do so.
- Open a business bank account. Open a business checking account in the legal business name. Once open, be sure to pay the financial transactions of the business from that account. If you use a business credit card (see below) for many financial transactions, be sure to pay the credit card bill from your business checking account.
- Establish a business phone number and address.Whether you use a landline, cell phone or you use VoIP, have a separate number for your business and in your business’s legal name. List that number in the directory so it can be found, along with your address
- Open a business credit file. Open a business credit file with all three business reporting agencies: Experian, Equifax and TransUnion.
- Obtain business credit card(s). Obtain at least one business credit card that is not linked to you or any other owners personally. Pick a business credit card from a company that reports to the credit reporting agencies. Pay your card on time to build your credit. Some credit card companies specifically focus on small business credit, and have special promotional offers.
- Establish a line of credit with vendors or suppliers. Work with at least four vendors / suppliers to create credit for your company to use when purchasing with them. Ask them to report your payment history to the credit reporting agencies. Or, apply for a business term loan and use the funds to invest in your business.
- Pay your bills on time. Be sure to pay your bills on time. Like with your personal credit, late payments will negatively impact your business credit.
- Check your credit report. Just as with your personal credit, keep an eye on your business credit too. Check your report regularly with the credit bureaus, and report anything that is not correct.
Small Business Electricity Deposits
Electricity is a post-paid service. That means that your Retail Electricity Provider (REP) will arrange to have power flow to your business location, and collect money after you’ve received and consumed the electricity. In Texas, because the REP performs the billing function, they are also on the hook for paying the delivery fees to your local distribution company or utility (usually before you even pay your bill).
That’s why most REPs will run your credit and require a deposit if you don’t meet minimum credit thresholds. Just like your business can’t afford to give away free products or services, REPs can’t afford to give away free power The deposit is their guarantee that the bill will be paid.
You can get no deposit business electricity from ENGIE or NRG. Check rates below. If you are a new business with no business credit rating, or need second chance credit for your business, consider these options when you pick your plan.
Business Electricity Rates – Houston/CenterPoint
Plan Name Term Rate/kWh NRG 6 Months 6 5.71 ¢ Gexa Energy 6 Months 6 5.80 ¢ Gexa Energy 9 Months 9 5.94 ¢ ENGIE 6 Months 6 6.14 ¢ NRG 12 Months 12 6.14 ¢ APG&E APG&E 6 Months 6 6.21 ¢ Chariot Business Preferred 12 Months 12 6.22 ¢ APG&E APG&E 12 Months 12 6.22 ¢ Gexa Energy 12 Months 12 6.24 ¢ Gexa Energy 18 Months 18 6.24 ¢
Shop Business Electricity Rates in Your Zip Code
Alternatives to Paying an Electricity Deposit for Your Business
If a deposit is required it will be equal to 1/5th of your estimated annual electricity bills. That could be $1000 or more. Instead, here are some alternatives to paying a deposit for your business.
- No Credit Check Electricity. Apply for service with an electricity provider that doesn’t require a credit check or deposit for small business. In Texas, that’s ENGIE and NRG.
- Letter of Good Credit. As a Texas small commercial customer, you have many of the same rights as a residential customer. You can get a deposit waiver if you provide a letter of good credit from your current REP showing not more than one late payment in the last 12 months.
- Submit Recent Electricity Bills. Some providers, including Chariot Energy, will accept copies of your 2 most recent electricity bills showing good payment history.
- Submit a Personal Guarantee. Your provider may allow the owner of the company to provide a personal guarantee of payment, and run a credit check on the owner’s credit report.
Ready to shop for electricity for your small business? View current business electricity rates.>>
Sources: Fundera; Walters Kluwer
