How to Build Business Credit

A company needs to build business credit, just as a person needs to build their personal credit. In either situation, a good established credit leads to the ability to attain loans, lower interest rates and qualify for special promotions or events. Here are a few steps to consider when building business credit:

Step 1 – Correct Information

Make sure you have the correct billing information on all of your accounts. This includes any vendor accounts, bank statements, business investments and so forth. This will be what ties your credit portfolio together.

Step 2 – Have The Following

The first item you need is a dedicated telephone line under the company’s name, at the business location.  Also, be sure your company is listed in the yellow pages because it is a requirement when signing up with Dun and Bradstreet. You will also need your own business account that is solely used for your company, drawn up by your company.

Last but not least, consider converting your company to a LLC or corporation.  Converting your company can transfer the business debt responsibility away from your personal finances.  Also, file for an FEIN (Federal Employer Identification Number) with the IRS.  The FEIN is a simple and quick process that be can be completed online. 

Step 3 – Sign Up With Dun & Bradstreet

You will need to first establish a D-U-N-S number. They will give a creditor identification number and you can choose a credit package directly from Dun & Bradstreet.

Step 4 – Get With Vendors

If you are currently working with vendors, ask if they report to the credit bureaus. If they do, ask them to start reporting you. They do not have to report anything by law, so you will have to ask, never assume they will report the debt.  Also, you will need to find prospective vendors that also report to credit bureaus because you will need to establish at least 4 vendor accounts for a strong business credit profile.

Step 5 – Apply For A Credit Card

A business should have a credit card. You need to work now to establish business credit for any future business loan you might need. After time, you will be able to expand your credit line as well. It is important to note that you need to get it under the business name, without your personal guarantee. On a business credit card, they should not ask for your personal information such as social security number. If they do, it is not intended to go under your business name. Always ask specifically that it is going under your business before you sign.

Step 6 – Create NET 30 Accounts

Net 30 accounts are basically like a credit line from the vendor. It allows you to make purchases through the vendor and then pay it off monthly. These accounts are usually reported to the credit bureaus.

Other helpful tools you can use are to visit your local SBA branch. They have teams set up around the US to help small business succeed. They are professionals that offer free help to small business owners.

Establishing your credit it one of the best things you can do for your business. It is the backbone you need in order to be successful in your venture. Make sure you pull your business credit report on a regular basis to monitor its progress. This is where most owners fall short. If you need to fix something, do it immediately. The longer you wait, the harder it is to fix credit score ratings.