Your business credit can be as important as your personal credit. Creditors and suppliers are increasingly using business credit reports to make lending and credit decisions. Building strong business credit is worth the effort. Credit lines open many doors, allowing entrepreneurs to buy necessary equipment and inventory, hire employees, launch marketing campaigns, and keep cash flow steady while revenue grows.
Getting approved for business loans and credit cards seems very challenging. According to a 2019 Federal Reserve small business credit survey, more than half (53%) of companies seeking new financing didn’t obtain the amount they requested.
Here are several steps to establishing business credit:
Incorporate or form an LLC (Limited Liability Company) to ensure your company is seen as a separate business entity
Obtain a federal Employer Identification Number
Open business bank accounts in your legal business name keeping personal and business expenses separate and build relationships with your banker
Set up a dedicated business phone line in your business name and make sure it's listed in directories
Register with Dun & Bradstreet to get a D-U-N-S number. Dun & Bradstreet, Experian, and Equifax measure risk factors associated with businesses. They evaluate qualities like business age, payment history, and the variety of accounts in your business credit report.
Write a comprehensive business plan
Build capital and show that your business is sustainable
Apply for a corporate credit card or business credit card. Keep existing credit accounts open and be patient.
Work with vendors that report payments and pay those vendors early
Monitor and review your business credit reports
Your business trades are then reported to Experian, creating a robust business credit report that gives lenders and suppliers quality information about your company. This improves your ability to obtain loans, increase credit lines, and secure more favorable credit terms. Get your business score here.
Credit Karma. How to build business credit written by Louis DeNicola. https://www.creditkarma.com/advice/i/build-manage-small-business-credit
NAV. written by Jennifer Lobb. https://www.nav.com/resource/how-to-establish-business-credit/
SBA. How to Build Business Credit Quickly: 5 Simple Steps written by Marco Carbajo https://www.sba.gov/blog/how-build-business-credit-quickly-5-simple-steps