When you’re starting your business, you have many decisions to make. Some will be straightforward, and others will seem straightforward— but turn out to be more complicated.
Take your business address, for example. If you have secured an office or retail location, your business address is straightforward. It’s where your business is located.
But what if you decide to work from home? What if you are subleasing space or your current location is temporary? One business owner recently told us that she is operating out of a business location but her landlord is unreliable about getting her mail to her. “What address should I use to build business credit,” she asked?
Building Business Credit
Many small businesses today start from home, and there’s little stigma around working from home these days. But you may not want to use your home address for a variety of reasons. Alternatives include:
- A PO Box: the US Postal Service allows you to reserve a box online
- UPS Stores allow you to use a business address (not a PO Box)
- Virtual office locations, including shared offices or co-working spaces
Keep in mind that any address you use should have the ability to receive mail during normal business hours.
Experian is one of the major commercial credit agencies and it “recommends using the address which has been used for any corporation filing, or business license filing, if either have been completed,” says Experian Sr. Product & Marketing Manager Mary Ann Strout. “This will help keep information about your business together. If these filings have not yet been completed, think about the address you will use to complete these filings or to promote your business.”
One risk is that information about a business could get merged with another business at the same address, particularly if the name is very similar. You’ll want to be very careful and consistent if you use the address of a shared office pace, for example; always include the full name of your business and the full address, including any box or suite number.
A physical address is preferred when building business credit, but it is possible to avoid using yours.
“Experian promotes physical addresses over virtual addresses, such as PO Boxes, if both exist,” Strout advises. “If a business plans to use a PO Box (or private Commercial Mail Receiving Agency), however, consistent use of that address will help maintain your business information integrity.”
I was self employed and worked from home for many years. I used a box at a local mail service similar to a UPS store. It didn’t hinder me from building strong business credit. In fact, my business credit scores were (and still are) excellent. I was required, however, to enter my home address when applying for my Employer Identification Number (EIN); instructions from the IRS state that you must “provide the entity’s physical address only if different from its mailing address shown in lines 4a–b.”
If you’re going to use your home address as your business address, keep in mind that some localities and homeowner associations may restrict home-based businesses. Those prohibitions aside, you can build business credit using your home address.
And a lender may prefer it.
“Most business credit providers, including Funding Circle, require a physical address,” says Chris Capecelatro, U.S. director of underwriting at Funding Circle. “This is used to verify your identity among other purposes. A home address is OK as long as the address makes sense for your type of business. For example, a dental practice applying for a loan with only a home address would be atypical and require further clarification.”
Whatever address you decide to use, be consistent when you apply for credit, and update it if it changes.
“Be sure to update your personal and business credit providers if you change addresses,” Capecelatro advises. “Not only will this help ensure that they can communicate with you, but if you apply for additional credit, any discrepancies in the addresses associated with your credit history could introduce delays in the funding process.”