How to Begin Building Business Credit

Begin Building Business Credit Fast

No matter what stage your business is in, it is critical that it establishes credit. Building business credit will make securing funding easier from lenders as well as qualifying you for favorable terms from vendors.

Avoiding personal credit card temptation and opening accounts with companies who report to business credit bureaus will all help your company build its credit history.

Keep Your Business and Personal Finances Separate

One of the key steps an entrepreneur should take to protect their personal finances from those of their business is legally disentangling them, such as selecting an LLC, LLP or corporation and registering it with the Secretary of State.

Establishing legal separation will facilitate easier credit and loan applications in the company name without impacting approval odds due to personal credit scores. Furthermore, this can protect personal assets against legal action or bankruptcy against the business.

Separating business and personal finances may help simplify tax season and help keep track of business expenses more easily.

Register for a DUNS Number

As part of your efforts to establish business credit, the next step should be registering your business with relevant government agencies. In the US, this involves registering its legal name and receiving an Employer Identification Number (EIN).

An EIN allows you to keep personal and business finances separate, as well as to establish its credit profile independently from that of yourself and/or other individuals in the organization. Furthermore, this documentation shows vendors that your company is legal.

DUNS numbers provide direct access to your company’s credit profile with Dun & Bradstreet and are integral in calculating PAYDEX score calculations and other ratings used by suppliers and creditors; additionally they’re required for federal government contract opportunities as well as System for Award Management registration (SAM).

Monitor Your Business Credit Report

Maintaining separate business and personal finances is key for small businesses looking to establish credit without their personal histories affecting approval odds, as well as those planning on seeking external funding in the future.

As opposed to personal credit, which is tied directly to one’s social security number, business credits are linked with EIN (Employer Identification Number). This allows companies with poor personal credit histories to qualify for loans, lines of credit and trade accounts with no problem at all if managed properly – thus making frequent use of business credit cards essential in building strong profiles and history.

Open a Business Bank Account

If your business is operating out of your personal bank account, separate accounts should be established as soon as possible. They allow for easier organization between personal and professional matters while making you appear more professional to vendors and customers when checks written to your company rather than your name are presented for payment.

Consider opening a savings account and credit card specifically tailored for business use if possible; both will help build business credit provided that payments are made on time. Suppliers reporting your payment histories directly to business credit bureaus is key in helping establish credit.

Open a Business Credit Card

Establishing business credit may not be required when seeking loans or lines of credit, but doing so can reduce its effect on personal finances while speeding up the application process as lenders will only look at your company’s history when reviewing financing applications.

Nav’s selection of the top business credit cards provides entrepreneurs with numerous options. Responsible use can help your company build its credit report and make qualifying for other forms of business financing easier in the future, plus many cards come equipped with benefits such as purchase protection and rewards programs.

Make Payments on Time

Your company’s ability to secure funding, make large purchases and negotiate better rates relies heavily on its business credit. As part of building it, legally establishing its existence as well as opening bank, credit card and vendor accounts are important steps – yet the most critical part is punctual payment practices.

Paying bills on time – be it rent for an office space, business credit card bills or any other vendor or supplier who report to credit bureaus – is key to building business credit. Vendors and suppliers reporting will see your history of on-time payments as they will see your history with them.

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