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Your Guide to Building Business Credit

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Previously, we took a look at what is business credit and what advantages it offers over personal credit, especially for those who are looking to start their new business. We discussed why it is important to keep your business credit separate from your personal household account, and why it can prove to be one of the most prudent financial decisions that you will ever make in your life.

Today we will be exploring how you can build up your business credit, and the things you need to look out for.

Here’s How to Build Business Credit

Just like you build up your personal credit, by buying things from your card and ensuring that you pay off the outstanding amounts on time, business credit building to works on the same principle. However, there are some new aspects to watch out for.

Business credit can only be availed if you have a, well, business. And that’s how you start.

 

Have a Legitimate Business

Apply for a business credit, and start building your profile. You need to do everything you can to keep your business and personal transactions separate.

Here are some of the things you need to do right off the bat:

  • Depending on where you live, the first thing you need to get is your employer identification number (EIN) from the tax authorities (such as the IRS if you are in America).

  • Get in touch with your attorney. Depending on where you start your business, you will need legal help for incorporating your company. Your lawyer can guide you on the best way to do that.

  • Check some banks to see if they offer free business checking. You can use this to get started and open bank accounts under your business’ name.

  • Last but not the least, if you can, get a small loan, credit card, or credit line from the bank you opened an account with. Make sure that you get these things under the name of your business.

Once you’ve done all this, congratulations. You are now a legitimate business.

It’s Time to Get Some Business Credit

Once you’re done registering your business and opening bank accounts under its name, you can now apply for a business loan.

Your credit doesn’t even have to be a formal loan even. In fact, build credit by working with your suppliers. This helps you get access to goods and services for your business today, with the added benefit of paying off for it later. It doesn’t matter what business you run, because you can avail credit for many things including warehouse space, office supplies and more. You can get credit for 30, even 60 days.

You can also ask your suppliers and partners to work with you and report your credit to business credit bureaus. In the event that they don’t report these credit, you can still list these trade lines as references for your Dun and Bradstreet report.

It is recommended to pay them on time. In fact, great business owners make it a point to pay them earlier so that they can get potentially better scores. This is because the Dun and Bradstreet scores are based on how quick you are with your payments, you even get a bonus for snappy payments.

Make Sure to Provide Your Information to Business Credit Bureaus

This is where it gets a bit complex. When you are looking to build up your business credit, you will need to ensure that information is provided to business credit bureaus. Always make sure that the information they have is correct, and always review those reports periodically.

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