7 Steps to Build Business Credit

Written by Banks Editorial Team
3 min. read
Written by Banks Editorial Team
3 min. read

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Business credit can open the door to many funding opportunities. Whether it’s loans, credit cards, or lines of credit, you can leverage these added resources to help foster expansion in your company without impacting cash flow. 

If you haven’t started building business credit yet, this guide will walk you through a proven seven-step process to begin building your business credit profile. 

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What is Business Credit?

In short, business credit is a term used to describe an entity’s ability to purchase goods or services now and pay for them in the future. 

Why Is It Important to Build Business Credit?

Establishing good business credit as a small business owner is vital if you want to grow your company but need additional capital to cover expansion costs. 

Many lenders review your business’s financial information when you apply for a business loan or credit card. If your personal and business credit history are up to par, and you have a good business credit score and personal score, you’ll likely qualify for favorable terms on debt products. Lower scores or little to no credit history could result in higher borrowing costs or denials in some instances.

7 Simple Steps to Build Your Business Credit

When you’re ready to start building credit for your business, follow this seven-step process:  

1. Register Your Business

Visit the Secretary of State’s website to register your business. You’ll need to provide essential details and information about your business and its structure (i.e., sole proprietorship, partnership, or corporation). 

2. Get a Federal Tax ID Number (EIN)

Apply for your federal tax identification number or employer identification number (EIN) from IRS.gov. The process takes around 15 minutes, and the EIN will appear on the screen once you’ve completed the questionnaire. 

3. Open Business Bank Accounts

It’s never a good idea to mix personal finances and business finances. You’ll need to open a business bank account – either a business checking account, business savings account, or both – to keep your company’s finances separate.   

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4. Borrow From Lenders 

Apply for at least three loan or credit card products with lenders or creditors who report to the credit bureaus. In addition, reach out to your bank or credit union to learn more about business loans, credit cards, or lines of credit that may be available to you.

Also, consider online lenders like National Business Capital, which offer flexible business funding options. Whether you’re interested in a small business loan, line of credit, U.S. Small Business Administration (SBA) loan, or equipment financing, they have you covered. Enquire today about the options they have waiting for you by submitting an inquiry using the online form. It’s fast, free, and won’t impact your credit score. 

Business credit cards are another way to build a solid credit rating for your company. Plus, some feature interest-free introductory periods (on purchases), cashback rewards, and travel perks that reward you for everyday purchases. Of course, you’ll need a good or excellent personal credit rating to qualify in most instances, but if you opt for a business credit card that caters to consumers with lower credit scores, expect a steep APR.

Trade lines coupled with business loans and credit card products can help you build business credit fast, assuming you manage the accounts responsibly and make timely payments. If you’re currently doing business with suppliers or vendors, request to open trade lines if your account activity is reported to the business credit agencies. (You can do the same for entities you’re planning to do business with in the near future). 

5. Pay Your Creditors On Time

Payment history is the most important component of your business credit score. You’ll want to send your payments before the due date to avoid late charges that can result in penalties and hurt your business credit rating. (Note: Paying even earlier could give your business credit score an even greater boost). 

6. Ensure Your Record With Credit Bureaus Is Clean and Updated

Review your business credit profile and highlight any inaccuracies. File disputes right away to get them rectified, so your business credit score rating is an accurate reflection of how your company manages outstanding debt obligations. 

If you haven’t yet applied for a Duns & Bradstreet business identifier (D-U-N-S number), now’s the time to do so. Duns & Bradstreet will then collect your company’s information and use it to generate credit reports and scores for your business. 

7. Monitor Your Credit

Most importantly, check up on your business credit report often to track your progress. Monitoring your business credit report will provide insight into the factors that impact your credit rating the most. Plus, you’ll spot errors if they arise even sooner, allowing you to work with the credit reporting agency and have them resolved promptly.

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