How to Build Business Credit

How to Build Business Credit

Imagine that you are opening your own café. You’ve chosen a fantastic site, recruited your crew, and prepared your menu. Even the equipment and the first rent, utilities, and employees are covered by the seed money.

You will need credit, nevertheless, in order to properly handle the financial aspects of your business. Without it, you’ll be forced to utilize your available funds to cover expenditures as they arise, even before you’ve had an opportunity to make any money from the sale of your coffees, scones, and croissants. Even worse, if your firm is profitable, you may not have enough cash to fund its expansion. For growing companies to generate positive cash flows, time is necessary. With credit, you may do business since your suppliers and service providers will have faith in your ability to pay.

We’ll go through the significance of business credit, how a strong credit score may benefit your company, and how to finance and grow your operations in the sections that follow.

Main Points

Nearly all firms of whatever size depend on business credit.
Even if you don’t have cash on hand, credit enables you to purchase the goods and services you need.
Similar to personal credit, business credit must be created over time and is not always available.
Obtaining an EIN and DUNS number, establishing a company bank account, and applying for business credit cards are the first stages.

What Is Commercial Credit?

Without the necessary funds on hand, credit gives you the ability to buy products and services. When a creditor believes a customer will pay the entire amount due on schedule, credit is granted. For instance, having business credit may allow you to build a restaurant, which would be considerably more difficult if you relied just on your own funds.

There are several types of business credit, such as:

  • Loans to microbusinesses
  • commercial credit cards
  • Vendor credit (credit that suppliers and vendors provide to dependable clients)

How Commercial Credit Operates

Assume you own a hat manufacturing company and require raw materials and other merchandise to produce the items you sell. Before you design and produce the hats you want to sell, you cannot profit from them. But until you start selling the hats, you won’t have any money to cover the cost of designing and making them. But if you have business credit, you may put off paying for the hats you make today; without it, it could be impossible to advance at all.

Your credit may be able to assist you flourish if your hat company begins to prosper. Your company bank account may provide you access to a line of credit, your reputation with suppliers can help you acquire more goods, and having excellent credit can increase your access to loans.

What Affects Commercial Credit?

Because banks and credit card companies will consider both your company and personal credit histories, your personal credit may often affect your ability to establish business credit. However, if you have already paid off your personal debts for your own vehicle, home, and school (or continue to do so on schedule), you will be ahead of the game when it comes to establishing company credit.

Assuming your personal credit is in reasonably good condition, there are a few essential actions you must do in order to establish business credit:

  • Create a name, address, and phone number for your company.
  • Register your company with Dun & Bradstreet and the IRS.
  • open credit card accounts for your company.
  • Make credit arrangements with your usual merchants.
  • Pay your bills promptly, if possible.
  • Keep a careful check on the ratings and scores for your company’s credit.

Publish Your Company

You cannot establish business credit until your company is an independent legal entity. Even if you operate as a sole proprietorship, this is simple to achieve. Create your company’s name, address, phone number, and email domain first. Register your company with Dun & Bradstreet, a credit reporting agency, and the IRS to get an employment identification number (EIN).

Getting an EIN Number Registered

An EIN is a nine-digit set of special numbers that the IRS issues to your firm in order to identify it for tax-related reasons. Since your Social Security number (SSN) identifies you as a person, having an EIN formally separates you from your corporation.


Simply visit the IRS website, choose the kind of company you are the owner of, and complete the paperwork to get an EIN number.

Creating a Dun & Bradstreet number registration

A credit reporting agency called Dun & Bradstreet offers data to lenders and other companies. The company does this via a data universal numbering system (DUNS) number, a special nine-digit identification it offers to firms.

The DUNS number functions similarly to an EIN number in that it serves to distinguish your company from you personally. More significantly, lenders and prospective business partners use it to assess your company’s dependability and financial stability. In order to apply for grants or do business with government organizations directly, firms must also obtain a DUNS number, according to the US government.

Create Company Accounts

You may begin creating business bank accounts as soon as you have your address, EIN, and/or DUNS number in order. Whether you choose bank accounts, credit cards, or both, you may begin establishing credit right away.

Accounts in banks

Bank accounts for businesses come with a variety of benefits that personal accounts do not. For instance, they enable debit and credit card transactions, provide you buying power, and may include a line of credit as well as personal liability insurance. However, it’s crucial to remember that banks don’t simply provide business accounts to everyone. You must submit an account application (often online), and you may need to give:

  • Your EIN (or SSN if you run a single proprietorship) number
  • paperwork for forming a business
  • If required, a business license
  • Any ownership contracts you could have

Cards — Credit

You may apply for a business credit card using only your company’s EIN number. There are certain businesses that provide EIN-only credit cards, and in principle this helps to segregate your personal credit from your company credit. But in fact, before providing a card, the majority of credit card firms will request your SSN and examine your personal credit.

Pay your suppliers.

The majority of firms rely on vendors and suppliers, therefore you should start building a good rapport right away. That entails consistently paying your suppliers on schedule. You could work with the following suppliers, depending on your line of business:

  • organizations that provide the raw resources for your goods
  • sellers of office supplies that maintain paper in your copiers
  • the companies who provide the goods you offer in your store
  • producers who really produce the goods you design

Once you’ve built up trust with your suppliers, you may start to consider creating credit with them. Your credit will be stronger and your suppliers’ ratings will be better the better your relationships with them are.

Monitor Your Business Credit and Budget

You’ll need to control and monitor both your expenditure and your income as your company grows. You’ll also need to maintain and keep an eye on your credit score. Both will be crucial for maintaining a good credit score and avoiding any problems.

You must keep your personal and corporate funds separate in order to manage your business budget. If you’ve previously opened business bank accounts and credit card applications, this is rather straightforward.

You’ll need to get credit reports from companies like Dun & Bradstreet and Experian in order to manage your credit. Although these reports are not free, they are quite helpful since they provide you details on:

Your credit reports’ veracity

  • alterations to your report that can have an effect on your company
  • Any possibilities to raise your credit score
  • likely identity theft
  • Individuals and businesses that are enquiring about your credit

Effects of Business Structure on Credit

Separating company and personal credit is quite simple if your small business is an LLC, S corporation, or C corporation. However, as was already noted, it’s extremely probable that banks and credit reporting agencies may request your SSN in order to double-check your personal credit before extending business credit.

You do have the choice to always use your SSN as your credit identification number if you are a single owner without any employees or certain sorts of assets. If you do, an agency will only be able to assess your creditworthiness based on your personal credit. Even if you run your firm as a single proprietor, you need open a bank account in its name to keep your personal funds distinct.

How Can I Establish Business Credit the Quickest?

Start by creating your company as a distinct entity with its own name and location in order to acquire business credit. Register your company to get an EIN from the IRS and a unique DUNS number from Dun & Bradstreet. Apply next for a company bank account and credit cards.

Can Someone With Poor Personal Credit Build Business Credit?

It is possible to establish company credit even with poor personal credit, but it is challenging. That’s because before extending credit, the majority of banks and credit card businesses often need your SSN. Prior to requesting business financing, it is important to fix your personal credit. Another option is to apply for business credit cards that don’t need an SSN and accept your company’s EIN.

How can I check the credit rating of my company?

By purchasing reports from Dun & Bradstreet and credit reporting companies like Experian and Equifax, you may verify your company’s credit score. Although these reports are not free, they include highly crucial financial data. Instead than being offered to corporations, free credit reports are largely provided to individuals.

A good business credit score is what?

Each company credit agency has a unique rating methodology. The Federal Reserve’s 2021 Small company Credit Survey, however, classifies a company credit score between 80 and 100 as having a “low credit risk.”

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