How to Build Business Credit in 5 Easy Steps

Everyone knows the old catch-22, “You can’t get a job without experience, but you can’t get experience without a job.” Well, the same is true, and possibly even worse, for building business credit. But don’t let that stop you from pursuing your dreams. There are some easy and low-risk ways to start establishing your business credit and to set you on your way to getting your business the funding it needs.

Whether you’re starting a new business or looking to take your current business to the next level, one of the first things you’re likely to need to get your business started is equipment and supplies. Or maybe you’ve got production under control, but you need an assistant to help you get the work done. These things, needless to say, require money, sometimes lots of it, which you may not have. Establishing solid business credit will enable you to get a loan or line of credit that can help cover these expenses, or others.

Should You Use Your Personal Credit Score?

If your business needs funding, you may be able to get a loan using your personal credit. You may also be able to use your personal credit score as a basis for proving that your business is loan-worthy. If you are planning to rely on your personal credit in order to establish business credit, you’ll need to get a copy of your credit score report. Go over the report carefully and fix any problems that you find with your credit in order to improve your personal credit. Once you’ve established enough business credit, take steps necessary to detach your personal credit with your business credit as quickly as possible. This will protect your business credit score from dropping if you have personal financial troubles. It will also protect your personal credit score in case your business runs into cashflow problems.

Using your personal credit score as a basis can be especially helpful if you company is new and hasn’t yet established its own business credit. Fortunately, there are many lenders that will look at the business owner’s credit as a gauge to whether he or she is a good loan candidate. Just make sure that you blur these lines responsibly.

Register Right

No one is going to even consider giving your new business credit if you don’t have an official business. You’ll need to talk to an accountant or lawyer to incorporate your business. Ask other entrepreneurs in your area for recommendations of professionals who can help you so that you know all of your pieces are put into the right places. Incorporating a business means establishing a separate legal entity that has nothing to do with you or your personal finances. Once your business is incorporated, you’ll get a federal identification number known as an EIN in the United States. With this number go to your local bank and open a business account with your EIN number. Giving your business this level of legitimacy is a crucial first step to being able to establish business credit for your new business.

Get Listed with Credit Agencies

To start building business credit quickly you can submit your company to one of the three leading credit agencies; Equifax, Experian, or Dun & Bradstreet. If you apply with Dun & Bradstreet, for example, you will receive a DUNS number. This works similarly to having an EIN number for your business, except it isn’t associated with your taxes. You can apply for a DUNS number directly from Dun & Bradstreet through their website. Once they confirm you haven’t been issued a DUNS number already, they will provide you with one. You can then start building a credit profile with one of the most recognizable names in business data. You can apply for a DUNS number before you open a bank account, and then use your DUNS number to open your account so that your bank information will be automatically submitted to Dun & Bradstreet and added to your credit profile. You can also apply to Equifax or Experian to get the ball rolling on building your business credit.

Get a Business Phone Number

In this day and age, you’d be hard-pressed to find someone without a cell phone. People really don’t think about land lines as much anymore. For businesses, however, having a business phone number listed in the information directory, or 411 service, is an often overlooked but important part of establishing business credit. You can still forward your calls to your cell phone, but having a business phone number that credit bureaus and vendors can look up in order to confirm that you are a legitimate, established business, is an important line item when working to build up your business credit.

Get a Business Credit Card

The next step is to find a credit card company that will give you a secured credit card. These are different than regular, “unsecured” credit cards. Start by using the mighty Google and looking for “secured business credit card” to find options that can work for your business. These cards are specifically designed to be given to people with no or bad credit history. Getting approved for a credit card will enable you to start building business credit. Just be sure to pay your card’s balance on time. The interest rates on these cards are much higher than normal. Once you establish a record for paying your credit card debts in a timely manner, the credit card company will report to the credit bureaus and your credit score will improve.

Choose the Right Vendors

Once you have a way to pay for materials and supplies, start contacting vendors and suppliers to begin gathering the things you need for your business. Find out if they report to one of the big three credit bureaus. If they do, you’re in luck. A good report from them will increase your credit score. If you have already procured a business credit card, use it to purchase what you need, and be sure to pay off the balance diligently to keep improving your credit score. By using your EIN and/or your DUNS number when establishing relationships with your vendors, not only will they know you’re serious about your business, they’ll be helping you build your business credit every time you pay an invoice on time.

By taking these steps to establish your business credit apart from your personal credit, you will be giving your business the tools it needs to grow from a good idea into a solid business with an established credit that you can use to keep your business growing successfully.

By Marc Gottlieb

Marc is the owner of his own web building consulting company, and in this capacity, he has many years working as a small business owner. He also works as an online instructor at Open Tent Academy, where he teaches students how to build their own websites. When he’s not working in the tech world, Marc enjoys cooking, and recently published his first cookbook.

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