For many small business owners, accessing funding can feel like navigating a maze. Banks want perfect credit, collateral, or lengthy sales records—things most new or small businesses lack. The solution? Building business credit from scratch.
This guide will walk you through every step of the process, helping you establish, grow, and leverage your business credit. You’ll also learn how to make your company more fundable, ensuring you qualify for the credit you need when you need it. Ready to dive deeper? Don’t miss this Free Training, where you’ll discover 50+ funding options tailored to small businesses.
What Is Business Credit, and Why Does It Matter?
Business credit allows your company to borrow funds and build a financial reputation separate from your personal credit. A strong business credit profile not only protects your personal assets but also makes it easier to access higher credit limits, lower interest rates, and better loan terms.
If you’re just starting out or looking to scale, building business credit is essential for long-term growth. Here’s how to do it, step by step.
Step 1: Register Your Business Properly
The foundation of business credit is creating a legal identity for your company. This step separates your business finances from personal ones and establishes credibility with lenders.
- Choose a Legal Entity: Form a business structure like an LLC or corporation. Sole proprietorships make it harder to build credit since they aren’t distinct from personal credit.
- Get an EIN: An Employer Identification Number (EIN) is like a Social Security number for your business. It’s required for tax filings, business accounts, and most credit applications.
- Register Your Business Name: Ensure your business name is registered with your state or local government to solidify your legitimacy.
Step 2: Set Up a Professional Business Presence
Lenders and vendors will assess your business’s credibility before extending credit. A professional appearance builds trust and fundability.
- Business Address: Use a physical address or virtual office. Avoid P.O. boxes or residential addresses.
- Dedicated Phone Number: Obtain a business phone line listed in directories like the National 411 Database.
- Professional Website and Email: Your email should match your domain name (e.g., info@yourbusiness.com).
A professional setup signals to lenders that you’re running a legitimate and serious operation.
Step 3: Open a Business Bank Account
A business bank account is essential for separating personal and business finances. It also establishes a financial footprint that lenders can review.
- Use It Exclusively for Business: Deposit all revenue and pay expenses directly from this account.
- Choose the Right Bank: Look for banks that offer small business perks, like low fees or credit-building programs.
Step 4: Build Vendor Credit
Vendor credit is one of the easiest ways to start building your business credit profile. Vendors extend net-30 terms (pay within 30 days) and report payments to credit bureaus.
- Start With Easy-Approval Vendors: Look for companies like Uline, Grainger, or Quill that work with new businesses.
- Pay on Time (or Early): Late payments can hurt your credit, while early payments boost it.
Over time, these accounts will create a positive payment history, which is the backbone of your credit profile.
Step 5: Monitor Your Business Credit Scores
Just as you monitor personal credit, you should regularly review your business credit profile.
- Credit Bureaus: Focus on Dun & Bradstreet (D&B), Experian Business, and Equifax Business.
- D-U-N-S Number: If you don’t have one, register your business with Dun & Bradstreet to create a profile.
- Correct Errors: Dispute inaccuracies to maintain a strong credit score.
Step 6: Apply for a Business Credit Card
Once you have vendor credit established, you can apply for business credit cards. These cards report to business credit bureaus and can help you build your profile further.
- Start Small: Look for cards designed for new or small businesses.
- Avoid Overuse: Keep your credit utilization low (under 30%) to maintain a healthy credit score.
Step 7: Grow Your Credit Profile
With the basics in place, focus on expanding your credit portfolio:
- Credit Lines: Apply for small credit lines from banks or online lenders.
- Loans: Look into SBA microloans or other low-risk options.
- Vendor Relationships: Expand your trade credit by working with additional suppliers.
The key is to consistently demonstrate responsible borrowing and repayment habits.
Common Mistakes to Avoid
Even with a solid plan, it’s easy to make mistakes that derail your progress. Watch out for these pitfalls:
- Using Personal Credit for Business: This muddies the waters and exposes you to unnecessary risk.
- Late Payments: Payment history is the largest factor in your business credit score. Stay consistent.
- Overborrowing: Only apply for credit you truly need and can afford to repay.
Benefits of Building Business Credit
By building business credit, you can:
- Protect Personal Assets: Keep your personal finances out of business transactions.
- Access More Funding: Qualify for higher limits and better terms.
- Scale Quickly: Use credit to invest in inventory, marketing, or expansion.
Take the Next Step
Building business credit from scratch might seem daunting, but the rewards are well worth the effort. A strong credit profile gives you the power to fund growth, weather challenges, and create long-term success.
For more in-depth strategies, join this Free Training led by Ty Crandall, a business credit expert with over 17 years of experience. You’ll discover 50+ funding options, step-by-step credit-building strategies, and insider tips for success.
Conclusion
Every thriving business starts with a solid financial foundation. By following these steps, you can build a credit profile that positions your company for success. And remember, help is just a click away. Sign up for the Free Training to unlock the secrets of business credit and gain access to billions in funding opportunities.