The Essential Guide to Establishing Business Credit
When you’re getting your business off the ground, establishing your business credit can help you get the financial support you need. Good business credit can help you qualify for more substantial business loans and credit lines than you would get on your own.
Establishing your business credit is a process that takes time, and if you haven’t run a business before, you might not know where to start. Luckily, there are a few simple steps you can take to start building the credit you need. Here’s our ultimate guide to establishing business credit.
Check Your Personal Credit
If you don’t have business credit history, banks will review your personal credit when applying for a business credit card. While your personal credit won’t make or break your business finances in the long term, having a good credit score can certainly help you with financial opportunities early on in your business.
If you haven’t already, take steps to improve your personal credit by making on-time payments and reducing your credit utilization.
Register Your Business
To build good business credit, you’ll need to register your business as a separate entity from your personal finances.
For many entrepreneurs, this means registering as an LLC. However, there are several other business structures you could use, such as a C-corp or S-corp.
It’s also very important to register your business with the government and get an employer identification number, or EIN. Not only is this essential for tax purposes, but many lenders will also ask for it when you apply for funding.
Get a Business Credit Card
Even if you don’t have established business credit, it’s still possible to open a business bank account and credit card. This practice helps you keep your business finances separate from your personal finances. It also helps you build business credit by making on-time payments.
Get a DUNS Number
There are three business credit reporting agencies. Two of them, Experian and Equifax, also offer personal credit reporting. The third, Dun & Bradstreet, only offers business reporting.
To get a business credit score from Dun & Bradstreet, you’ll need a nine-digit DUNS number. You can get this number by registering for free on the Duns & Bradstreet website.
Your DUNS number will help lenders evaluate your financial reliability. Depending on your industry, you may also need a DUNS number for compliance or to partner with other businesses. For example, the federal government requires a DUNS number for all contractors.
Choose Lenders and Suppliers Who Report Payments
The fastest way to improve your business credit score is by working with lenders and business suppliers who will report your on-time payments to credit bureaus.
While this is a relatively common practice, not all lenders make these reports. Before taking out a loan or finalizing a contract, discuss this with the lender to determine if they submit this information to credit bureaus and how often.
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