When you’re thinking about starting a small business or recently started one you’ll need to build credit so you can qualify for a loan to expand your business. Building your business credit makes it easier and less expensive to get financing, business insurance, and favorable payment terms with your suppliers. In this article, we’ll cover some basic steps you can take to build business credit and help your small business grow.
Operate Like a Business
The first step to effectively establishing business credit is to properly establish your business. If you have a new business this means taking the time to set up your business so it appears professional to both potential clients and lenders. Establish a business phone number, and get it listed in directory assistance. Create and use a professional email address. Choose and consistently use a business address which can be a P.O. Box or physical location.
Register Your Business
Businesses should be officially registered within their state. If you form a business entity like an LLC or S Corp, you’ll have already completed this state. If you operate as a sole proprietorship or independent contractor and have not registered your business, you have the option of filing a fictitious business name with your state. This is sometimes referred to as a “DBA.” Make sure to check your state requirements.
Get a D-U-N-S Number
A DUNS number is your business identifier with the credit reporting agency Dun and Bradstreet. If your business doesn’t already have one you should request one. It’s free. Creditsafe, Equifax, and Experian all have their own identifiers but you don’t need to initiate this type of request with them.
An EIN is the business equivalent of a Social Security number. The IRS requires some businesses to get an Employer Identification Number (EIN), but having one is not a requirement to build your business credit. Keep in mind that some business financial applications may require an EIN, so getting one could work to your advantage.
Establish Accounts that Report to Business Credit Agencies
The most important part of your credit report will show how you pay your bills. Past payment history is used to predict how likely your business is to pay on time. That means you need accounts that will report to business credit bureaus, and not all do. Establish at least 2-3 accounts with companies that report.
These can include:
- Suppliers and vendors
- Business loans and financing
- Credit builder accounts
- Business credit cards
Open a Business Credit Card
Opening a business credit card that reports to the major commercial credit reporting agencies is a guaranteed way to build business credit. You can also benefit from perks such as cash back or travel rewards. Most small business credit cards will use your personal credit scores and income from all sources to determine if you qualify.
Need Help Building Your Business Credit?
When you partner with a credit score counseling agency, you can save a lot of time and money, speed up your credit building process, and learn strategies that will help you in the long-term future.
Credit Expert LLC has helped countless individuals and businesses build their credit scores.