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In order to build a successful business, you need more than just a great idea. You also need good credit. Understanding how to build business credit is vital as it can be used to secure loans, lines of credit and other financial assistance to help your business grow.

In this article, we’ll discuss 14 ways to enhance business credit with the guidance of business credit bureaus. If this sounds like the golden ticket to propelling your business forward, you’re right. Let’s dive in!

Why it’s Important to Establish Business Credit

Establishing a robust business credit profile is a critical step in fostering a healthy and sustainable business. It not only opens the door to financial opportunities but also establishes trust and credibility in the market. Here’s why dedicating time and effort to build business credit is essential:

  • Access to Better Loan Terms: A good business credit score can help you secure loans with more favorable terms, including lower interest rates and higher credit limits.
  • Separation of Personal and Business Finances: Building business credit helps to separate your personal finances from your business, protecting your personal assets and improving the creditworthiness of your business.
  • Leverage in Negotiations: Having established business credit can give you a better standing when negotiating terms with suppliers and vendors, potentially leading to better payment terms and lower costs.
  • Preparation for Future Opportunities: As your business grows, opportunities for expansion will arise. Having established business credit ensures you are prepared to seize these opportunities without unnecessary delays.
  • Attractive to Potential Investors: A strong business credit profile can make your business more attractive to potential investors or buyers, as it is a testament to the financial health and stability of your business.
  • Improved Chances for SBA Loans: Establishing business credit enhances your chances of securing a Small Business Administration (SBA) loan, which can be a vital resource in scaling your business.
  • Increased Business Value: Over time, having established business credit can increase the overall value of your business, as financial institutions, and potential partners or acquirers view it as a lower risk investment.
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When you’re just initiating your business journey, establishing credit with business credit bureaus is a vital step. It not only facilitates access to lines of credit and loans, vital for financing your business expenses but also enhances your eligibility for Small Business Administration loans.

how to build business credit - credit graphic drawn on a chalkboard

While building business credit is not a complex process, the process does require time, strategic planning, and consistent efforts. Initiating this process early on, coupled with maintaining a positive payment history and making informed financial decisions, can set a strong foundation for a prosperous business future. Remember, building credit is a gradual process that’s instrumental in paving the way toward making your enterprise thrive.

 

Here’s a word from Karlton Dennis on “How To Get Business Credit for Your LLC in 2023” you’ll want to check out after reading:

5 Benefits of Building Business Credit

how to build business credit - woman with a cup of coffee looking at her good credit rating on a laptop

We’ve already established that business credit is important for getting loans and other forms of financial assistance. But what are some other benefits of building business credit? Here are five benefits that building business credit brings:

  1. Builds credibility. Good business credit demonstrates to vendors, suppliers, and other business contacts that you’re a reliable, reputable company.
  2. Gives you a financial safety net. If you have business credit, you can tap into it in times of need. This can help you weather a financial crisis or take advantage of opportunities when
  3. Track your expenses. Personal and business finances can get mixed up quickly, making it difficult to track business expenses. However, if you have business credit, you can more easily keep track of your business expenses, which can be helpful come tax time.
  4. Get better terms from suppliers. Good business credit scores can give you access to better terms with suppliers, such as extended payment terms.
  5. Helps you get loans. This is the most obvious benefit of business credit, but it’s worth mentioning again. If you have good business credit, you’re more likely to get approved for loans and other forms of financing.

How to Build Business Credit

how to build business credit - businessman meeting with a loan officer

How do you build business credit? It’s a question that many small business owners ask, and for good reason. There are a number of things you can do like watching your credit utilization, but here are 14 of the most effective strategies:

1. Establish Your Business Entity

This includes incorporating as a limited liability company or other corporate entity, obtaining an employer identification number, and setting up a business phone number ensuring it’s used as a dedicated business phone line.

2. Register Your Organization

As a business owner, one of the best things you can do to build business credit is to register your organization with a business credit reporting agency. This ensures your business credit file is established and that your payment history is reported to the business credit agencies.

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3. Set up a Business Bank Account

Setting up a business checking account is another way to build business credit and have a good-looking business credit file. When you have a business bank account, be sure to use it for all of your business-related transactions. Business bank accounts help build a strong payment history and improve the chances of getting approved for loans and other forms of financing.

4. Apply for a Free DUNS

To help establish credit for your business, you can apply for a free D-U-N-S number. This D-U-N-S number is used by business credit reporting agencies to identify your business. Any business credit bureau will require a D-U-N-S number before they will begin reporting your payment history.

5. Report to Business Credit Reporting Agencies

Your business credit report is one of the most important factors in determining your creditworthiness. Therefore, it’s important to have a positive payment history in your business credit reports.

6. Establish Trade Lines with Vendors and Suppliers

As a business owner, it’s important that you’re establishing business credit with vendors and suppliers. Trade credit allows you to purchase goods and services on credit, which can be especially helpful when you’re just starting out or if you’re experiencing cash flow problems.

7. Get a Business Credit Card

Business credit cards are a great way to establish credit in your business’s name. When you use a credit card and make timely payments, you’ll build a positive payment history. This helps improve business credit scores and potentially results in a credit limit increase.

 

 

8. Apply for a Line of Credit

Credit lines are one of the most common types of financing for small businesses. When you have a business line of credit, you can borrow money up to your credit limit when you need it and only pay interest on the money you borrow.

9. Make Timely or Early Payments

When you pay your bills on time, it shows up on your credit report and tells creditors that you’re a responsible borrower and can be trusted to repay your debts.

10. Connect with Other Businesses in Your Industry

Connecting with other businesses can be a great way to build business credit. When you’re connected with other businesses in your industry, they may be more likely to extend trade credit or offer other financing options.

11. Join an Entrepreneur Group or Networking Organization

Doing this can help you connect with other small business owners who can offer advice and support. These connections can also potentially lead to financing opportunities.

12. Request Trade References from Suppliers and Customers

When you request trade references, it shows that you’re actively working to establish business credit. These references can be helpful in building your business credit report and score.

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13. Borrow Responsibly

Don’t max out your credit cards or take on more debt than you can handle. When you borrow responsibly and make timely payments, you’ll improve your business credit score.

 

 

14. Monitor Your Credit Scores

Always track business credit score changes so you can identify any potential problems early on. This will help you make the necessary changes to keep your business credit score strong.

Step-by-Step Guide to Building Business Credit: A Checklist

As mentioned, building business credit is essential for securing future funding and fostering a thriving enterprise. Use this comprehensive checklist to systematically build a robust business credit profile.

Step Description Completed
1 Establish Your Business Entity: Incorporate as an LLC or other corporate entity, acquire an EIN, and establish a dedicated business phone line. [ ]
2 Register Your Organization: Register with a business credit reporting agency to initiate your business credit file and facilitate the reporting of your payment history. [ ]
3 Set up a Business Bank Account: Use this account for all business transactions to build a strong payment history, enhancing your chances of loan approvals. [ ]
4 Apply for a Free DUNS: Secure a D-U-N-S number, a unique identifier that credit bureaus use to start reporting your business payment history. [ ]
5 Report to Business Credit Reporting Agencies: Maintain a positive payment history in your business credit reports, a critical factor in determining your creditworthiness. [ ]
6 Establish Trade Lines with Vendors and Suppliers: Build credit with vendors and suppliers, facilitating the purchase of goods and services on credit during startup or cash flow issues. [ ]
7 Get a Business Credit Card: Utilize a business credit card to establish a positive payment history, enhancing business credit scores and potentially leading to an increased credit limit. [ ]
8 Apply for a Line of Credit: Access flexible financing options with a business line of credit, allowing borrowing up to a set limit with interest charged only on the borrowed amount. [ ]
9 Make Timely or Early Payments: Build trust with creditors by consistently paying bills on time, reflecting positively on your credit report. [ ]
10 Connect with Other Businesses in Your Industry: Foster connections with industry peers to open up potential avenues for trade credit or other financing opportunities. [ ]
11 Join an Entrepreneur Group or Networking Organization: Expand your network and gain insights through membership in business groups, potentially unveiling new financing opportunities. [ ]
12 Request Trade References from Suppliers and Customers: Actively solicit trade references to bolster your business credit report and score. [ ]
13 Borrow Responsibly: Maintain healthy credit utilization by avoiding maxing out credit cards and managing debts wisely to enhance your business credit score. [ ]
14 Monitor Your Credit Scores: Keep a close watch on your business credit scores to promptly address any issues, ensuring the sustained strength of your business credit profile. [ ]

Feel free to print or save this table as a guide to systematically build and maintain a strong business credit profile.

FAQs

How long does it take to build business credit?

When learning how to build credit for business, it’s important to remember that Rome wasn’t built in a day. It takes time to build business credit, usually about 6-12 months. But, the effort is worth it.

Can a personal credit card help with building business credit?

how to build business credit - business credit card

No. You need to use a business credit card to establish business credit. However, your personal credit score may go down since a hard inquiry will be run when you apply for your credit card.

Can you establish company credit if you don’t have any debt?

Yes, it is possible to establish business credit without incurring any debt. One way to do this is to get a business credit card with a $0 balance. Another way to do this is to join a business credit monitoring service.

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