Building Business Credit: Which Methods Yield the Best Results?

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Building Business Credit

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Establishing and building business credit is essential for the growth and success of small businesses and medium-sized companies (SMBs). A strong business credit profile enables companies to secure bank loans, lines of credit, and favorable payment terms with vendors and suppliers. It also opens up opportunities for alternative lenders, business credit cards, and potential partnerships with investors. In this article, we will explore the importance of business credit and provide a comprehensive guide on how SMBs can quickly build and improve their business credit.

Understanding Business Credit

Business credit refers to a company’s ability to access financing and purchase products and services on credit terms, such as net 30 days. It is determined by a business credit score, which assesses the payment risk associated with a company. Business credit is offered by vendors, suppliers, financial institutions, and alternative lenders. It plays a crucial role in the financial health and stability of a business, allowing it to manage cash flow, invest in growth opportunities, and establish strong relationships with stakeholders.

Types of Financing for Small Businesses

Small businesses utilize various types of financing to support their operations and growth. These include small business loans, finance companies, fintech companies, angel capital, venture capital, personal credit cards, and capital from friends and family. While these financing options serve different purposes, establishing and building business credit is crucial for accessing favorable terms and expanding financial opportunities.

Strategies to Build Business Credit Quickly

Building business credit requires a systematic approach and adherence to best practices. Here are thirteen effective strategies that small businesses can implement to build business credit quickly:

1 – Establish and Register a Legal Business Entity

One of the first steps in building business credit is to consult with an attorney and a certified public accountant (CPA) to establish a legal business entity. This involves registering the business with the Secretary of State in the respective state of operation. Choosing the right legal entity, such as a Limited Liability Corporation (LLC) or a Corporation, provides credibility and separates personal and business finances.

2 – Set up the Business Phone Number and Address

To establish a professional image and facilitate communication with vendors and lenders, it is important to set up a dedicated business phone number and a physical address. This could be a physical business location or a P.O. Box. Listing the primary business phone number in a directory enhances visibility and accessibility.

3 – Apply for an EIN from the IRS

Obtaining an Employer Identification Number (EIN) from the Internal Revenue Service (IRS) is essential for tax purposes and establishing business credit. The EIN serves as a taxpayer identification number and helps in matching verification, preventing fraud, and filing income tax returns. While sole proprietorships can use their Social Security Number, obtaining an EIN is recommended for a separate business identity.

4 – Apply for a DUNS Number

Dun & Bradstreet (D&B) is a prominent business credit reporting agency that assigns a unique identifying number known as a DUNS number. This number is used to track and report business credit data for a company, establishing relationships between related corporations. Applying for a DUNS number is necessary when applying for credit payment terms with vendors or suppliers who require it.

5 – Optimize Venture Capital Opportunities

For high-growth companies with ambitious revenue projections, accessing angel capital or venture capital can provide a significant boost. Having initial capital enables timely payment of bills, establishing positive credit scores through good payment history and control of outstanding balances. Paying bills on time is crucial for building business credit and demonstrating creditworthiness.

6 – Apply for Vendor Credit Accounts

Vendors and suppliers offer various credit account options, such as net 30, net 45, net 60, or even net 90 payment terms for approved companies. Applying for vendor credit accounts is an effective strategy for building business credit as they report positive credit history to credit reporting bureaus. Some vendors specialize in helping new companies establish business credit. While some vendors charge an annual fee for membership, trade credit can be advantageous as it doesn’t incur interest when paid on time and often offers early payment discounts.

7 – Apply for Business Credit Cards

Applying for small business credit cards with a line of credit is an excellent way to build business credit quickly and separate business expenses from personal expenses. It is important to limit business purchases and outstanding balances on business credit cards to avoid negatively impacting personal credit scores. Some credit card issuers report business credit card activity to both business credit bureaus and consumer credit bureaus, affecting personal credit utilization ratios.

8 – Make Timely Payments

Making timely payments to suppliers and lenders is paramount in building excellent business credit and demonstrating creditworthiness. Automating payments through solutions like AP automation software and utilizing payment methods like ACH transfers can streamline payment processes, reduce errors, and ensure prompt payments. Timely payments are a cornerstone of good business credit and pave the way for favorable credit terms and discounts.

9 – Consider Invoice Factoring

Invoice factoring can be a valuable tool for improving cash flow and building business credit. With invoice factoring, businesses receive advance payments on invoices upon order shipment or completion. This improves cash flow, allows for timely or early payments, and increases business credibility. Invoice factoring does not require business credit score inquiries and helps businesses avoid credit score reductions.

10 – Implement Strategic Finance and Rolling Budgets

Strategic finance and rolling budgets are effective tools for improving operational efficiency and business performance. By utilizing advanced software systems, automation, and artificial intelligence (AI), businesses can eliminate manual tasks, increase efficiency, and gain valuable business intelligence. Rolling forecasts and short-term budgets help control costs and provide better spend management. A strategic CFO can serve as a valuable resource in optimizing financial results and guiding the finance department and executive management team.

11 – Monitor Business Credit Reports

Regularly monitoring business credit reports from credit bureaus such as Dun & Bradstreet, Equifax, Experian, and Creditsafe is essential in tracking credit scores and progress in building business credit. Monitoring credit profiles allows businesses to identify and correct any incorrect information that may negatively impact credit scores. It also enables businesses to investigate and report any discrepancies, ensuring accurate credit reporting and improved credit scores over time.

12 – Optimize the Owner’s Personal Credit Score

While building business credit, it is important to also consider the owner’s personal credit score, as some suppliers may request personal credit information during credit inquiries. Personal credit scores can impact business credit access, especially for small business administration (SBA) loans that may require personal guarantees. By managing personal credit responsibly and maintaining a good personal credit score, businesses can enhance their overall creditworthiness.

13 – Apply for SBA Loans or Bank Lines of Credit

Small Business Administration (SBA) loans and bank lines of credit provide additional financing options for small businesses. SBA loans are guaranteed by the U.S. Small Business Administration and require thorough preparation, including a business plan, financial projections, collateral details, and industry expertise. Building relationships with local lenders and establishing a solid credit history can increase the chances of securing favorable loan terms and credit lines.

Benefits of Good Business Credit

Building and maintaining good business credit offers numerous advantages for small businesses and medium-sized companies. These include:

    • Business Credit Card Perks: With good business credit, companies can access business credit card perks such as cash-back rewards, rebates, and other benefits.

    • Lower Interest Rates: Good business credit allows businesses to secure loans and credit lines at lower interest rates, reducing borrowing costs.

    • Lower Insurance Rates: Insurance providers consider business credit when determining insurance rates. Good business credit can lead to lower insurance premiums.

    • Improved Vendor Relationships: Strong business credit enables businesses to negotiate better payment terms, discounts, and longer repayment periods with vendors, improving cash flow and reducing costs.

    • Reduced Need for Cash on Delivery (COD): With good business credit, businesses can avoid the need to pay for products upon delivery or before shipment, improving cash flow and flexibility.

Building good business credit is essential for maintaining a healthy financial position, ensuring access to favorable financing options, and establishing strong relationships with stakeholders.


Establishing and building business credit is crucial for small businesses and medium-sized companies seeking financial stability and growth. By following a comprehensive strategy that includes legal entity formation, timely payments, vendor credit accounts, business credit cards, and other best practices, businesses can quickly build and improve their business credit profiles. Good business credit opens up opportunities for favorable financing terms, better vendor relationships, and lower borrowing costs. By prioritizing business credit, SMBs can strengthen their financial foundation and pave the way for long-term success.  You can compare business credit services on this page.

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