Skip to main content

Help! I Need Business Credit FAST

If you own a business, it might not be entirely necessary to build business credit, but there are several reasons why it’s a good idea. But this isn’t something you can accomplish overnight. Here is why you might want to start working on building business credit and some of the steps you can take to do it. 

The Benefits of Having Good Business Credit

When you don’t separate your business and personal finances, you could put your personal credit score in jeopardy if your business hits a rough spot. Likewise, a misstep in your personal finances could impact your ability to get business financing. 

Having separate and good business credit provides you with several benefits:

  • It positions your company for more favorable payment terms with suppliers and other vendors; 
  • It allows you to secure better interest rates and terms on business loans and other agreements; and
  • It reduces the number of times you’ll be asked to prepay for goods and services.

Eight Steps for Building Business Credit

It’s not difficult to build business credit, but you’ll need to take a deliberate approach to the process. First, business credit is similar to personal credit in that lenders can pull a report from a bureau, such as Dunn & Bradstreet, Equifax, or Experian. Each agency pulls records from creditors, lenders, insurance companies, and suppliers to build its file on your company. 

If you want those files to have any substance, you’ll need to follow these steps:

1. Make Your Business Official

It’s going to be tough to build business credit if you are operating as a sole proprietorship or partnership since there is no legal separation between the business and its owners. It’s a better idea to incorporate or form an LLC to create that separation. 

2. Get a Federal Tax Identification Number (EIN)

Next, you’ll want to contact the IRS to get your EIN, which is like a social security number for your business. When you file your business tax returns and deal with vendors going forward, you’ll use this number. 

3. Open a Business Bank Account

Once you have your EIN, go to your bank or credit union of choice and open up a business checking account. You’ll want to start using that account to make payments for business operations, such as inventory. 

4. Establish a Business Phone Number 

You should also have a separate phone line for your business. This can be a cell phone, landline, or VoIP number, as long as it is registered in your business name. 

5. Open a Business Credit File

Contact all three business credit reporting agencies (D&B, Equifax, and Experian) to open a credit file. 

6. Get a Business Credit Card

Obtain at least one business credit card that you don’t have to personally co-sign. When you apply, ask if the company reports to the business credit bureaus. If they don’t, find someone else. 

7. Establish a Line of Credit With Suppliers or Vendors

Begin opening lines of credit with suppliers and vendors and ask them to report to the credit bureaus. Work on having at least five of these active. 

8. Pay Your Bills on Time

Always pay your bills on time. Just as with your personal credit, late bill payment or non-payment will have a negative impact on your business credit score. 

Building business credit is just one thing your business can do to improve its financial health. At Orcutt & Company, we provide comprehensive accounting and business advice services to help small businesses make prudent decisions and achieve their goals. Contact us today to learn more about our services.