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If you’re looking to build business credit quickly, this guide will show you how to do it.
I assume that you already have a business entity, such as an LLC. Sole proprietors and partnerships can build business credit too, but their financing options are limited.
I practice what I preach. I’ve been working in the business credit industry for over five years now, and my own business’s Dun & Bradstreet credit scores are quite good. Based on my own experience, and what I’ve learned working in this industry, this is how you can build business credit super fast.
1. Establish a Firm Business Identity
The first thing you need to do to build business credit quickly is establish a firm business identity. What this means is that your business needs to have its own name, address, phone number, and ideally its own website, email address, and social media.
The goal here is to qualify for business credit accounts without using your personal credit. To accomplish this, your financing applications need to show the lender that the business is a completely separate entity from the business owner.
This can be tricky for solopreneurs and small business owners. If you have a home-based business, you shouldn’t use your own home address.
Instead get a virtual business address. You can buy these for anywhere from $30-$60 per month. Then, use this address on your website, your articles of organization or incorporation, and lender applications.
Don’t use your personal cell phone for your business. You can get a Google voice number, or better yet, get a virtual business line. You can even get one 1-800 numbers this way.
It’s not essential to have social media for your business, but the modern consumer does expect it. Sometimes lenders will look at your business’s social media profiles in assessing your financing application.
You should have a simple website. Your email address should have the same domain as your website. There are lenders that will not except business financing applications with personal email addresses like Gmail or Yahoo email addresses.
The name, address, and EIN of your business should be the same on your government documents, your business bills, and your financing applications.
If you want to get automatic, immediate approval on your credit card applications, this information needs to be consistent everywhere.
2. Get an EIN
You want to build business credit using your EIN. This is so that you don’t have to use your Social Security number and personal credit.
It’s free to get an EIN (employer identification number). Go to the IRS’s website and sign up for one. It only takes about 3 to 5 minutes.
Many lenders will ask to see your Social Security number for Know Your Customer laws. Basically, they want to make sure that you’re not part of organized crime, and that you’re not laundering money.
Whenever possible, it’s best to leave your Social Security number off of your financing applications. If you are giving your Social Security number, read the fine print. Make sure that the lender is not checking your personal credit.
3. Get a DUNS Number
The most well-known business credit bureau is Dun & Bradstreet. They give out free DUNS numbers to businesses that apply for them.
This only takes about 10 minutes to do. Many lenders request your DUNS number with your business financing application.
Your DUNS number is your business’s identification number with Dun & Bradstreet. You need one to start building business credit.
4. Get a Separate Business Bank Account
Many lenders will reject business loan applications that only have a personal checking account.
Some lenders consider the length of your business to be when you opened your business bank account, not the date that the government uses.
Time in business requirements prevent new businesses from qualifying for most types of financing. Typically, they want to see it that a business has been around for at least two years, but sometimes they require three.
On a side note, if you don’t have a separate business bank account, it makes managing your business finances very difficult.
5. Check Your Business Credit Reports
Now that you’ve established your business identity, it’s time to check your business credit reports and scores.
Other business credit bureaus include Creditsafe, Ansonia, and PayNet. The Small Business Financial Exchange (SBFE) is a business credit information aggregator. They report data to the business credit bureaus.
You don’t know which credit bureaus each lender uses in the approval process, so you’ll want to check your business credit with as many as you can.
Business credit company Nav allows you to check your business credit reports and scores with Dun & Bradstreet, Experian, and Equifax. That’s a good starting place.
If your business credit is new, you may not have business credit reports to pull. On the other hand, you may find credit accounts that you didn’t know about. If there’s incorrect information on your business credit reports, you can dispute it.
Do you already have credit accounts and payments on your business credit reports? If so, that will make building your business’s credit that much easier.
6. Sign Up for a Business Credit Builder Loan
Now that you’ve checked your business credit, the main bulk of the work lies in getting new credit accounts and paying them on time.
Credit builder company CreditStrong offers a business credit builder loan. For businesses, this is the only business credit builder loan on the market. (However for consumers, there are many credit builder products.)
It works kind of like a reverse loan. You don’t get any money upfront. In fact, you’ll have to pay a small sign-up fee. Then you make monthly payments.
Depending on your plan, most or all of your monthly payment goes into a locked savings account. (Some of the monthly payment goes to interest.) At the end of your payment plan, you unlock the savings that you accumulated over that time.
Each of your monthly payments gets reported to the business credit bureaus. In this way, you can build your savings and your credit at the same time.
See Digital Honey’s highly-vetted list of business credit builder programs.
7. Sign Up for Net 30 Accounts
Net 30 accounts are vendor credit. This is also called “supplier credit” or “trade credit”.
Here’s how it works. You buy products or services with 30 day payment terms. Usually, no interest accrues over this time.
You usually have to apply for a net 30 account, and often there is a small sign-up fee.
Various companies offer net 30 terms to new businesses. If they report your payments to the business credit bureaus, then they will help build your business credit.
New companies typically can’t qualify for most types of business loans or business credit cards without using the business owners personal credit. So not 30 accounts is a perfect way to start building business credit.
Typically, you only have to buy from a company one time for it to benefit your business credit. Since you need multiple accounts to qualify for low interest business loans and credit cards, you’ll want to get anywhere from 8 to 10 net 30 accounts reported to your business credit.
See Digital Honey’s approved net 30 accounts vendor list for building business credit.
8. Sign up for Business Credit Cards
If you have good personal credit, you can leverage it to get your first business credit cards. Not all business credit cards report to the business credit bureaus. There’s a few things you need to know along these lines.
First, make sure that the business credit cards you apply to report to as many business credit card bureaus as possible. Next, make sure that they do not report payment activity to the personal credit bureaus. In this way, you can build business credit and protect your personal credit.
If you want to build business credit, make sure that you keep your balance low. Lenders like to see low credit utilization. They look back at your previous 24 months of credit utilization and calculate the average. Ironically, you’ll get approved for higher credit lines if you use less of your credit limit.
The first time I got approved for a business credit card with no personal credit check was a sweet day. Looking back, it really wasn’t that hard to do.
But we all have to start somewhere, which is why my first two credit cards leveraged my own good personal credit. You should get two or three business credit cards if you’re just starting out.
Don’t want to use your personal credit? Here is our unique list of secured business credit cards that report to D&B.
9. Make Your Payments Early
If you followed the steps in this guide, you should have at least 8 net 30 accounts, two business credit cards, and a business credit builder loan.
This alone is enough to get you qualified for many types of business financing, including term loans, business lines of credit, business auto loans, and business credit cards (that don’t use your personal credit).
You have to make all of your payments on time. In fact, Dunn and Bradstreet’s PAYDEX business credit score will not give you a top score without payments being made early.
Even one late payment can damage your business credit scores considerably, so this is crucial.
Also consider that your payment history is an important qualification factor. Even if all of your payments are made on time, if your payment history is sporadic, your credit profile isn’t as strong.
That’s why you want to show a monthly payment history over the course of 12 to 24 months.
Now obviously, you can’t build up a payment history in just 30 days. However, you can do all of the other steps on this list in 30 days.
If you follow all of the steps on this list in the first 30 days of building your business credit, then all you have to do is use your credit and make on-time payments.
Your business credit will build itself over the next 12 months. Then it becomes easy.
10. Stick to Your Goals
What are your goals in building business credit? Do you want $100,000 in business credit lines? $1 million?
Are you trying to buy a building for your business? Or acquire another business? Do you need more operating capital?
For many businesses, building business credit enables them to save more money on financing, and thereby operate on a higher profit margin.
For example, many real estate investors flip houses using expensive hard money loans or by raising capital with equity partners.
A savvy real estate investor will build his business credit to a point where all operating expenses can be paid for with low cost equity lines of credit and unsecured business lines of credit from a bank.
Businesses that use heavy machinery often have unfavorable equipment leases. Building business credit enables them to qualify for equipment loans.
Many e-commerce stores and retail shops use personal credit cards, business credit cards, and merchant cash advances to fund operating expenses. Instead, supplier financing, low interest business lines of credit, and SBA loans can become the main sources of work and capital. This saves them a fortune in interest and lender fees.
In short, business credit gives you more options. Sometimes potential vendors, customers, and investors will check a business’s business credit before doing a deal with them.
Better business credit means more opportunity for your business. Most business owners are interested in obtaining SBA loans. If that applies to you, you want to check your FICO SBSS score.
The popular SBA 7a loan has strict credit score requirements. If you want to qualify for it, you need a healthy business credit profile.
In my opinion, the goal of every small business that needs financing should be to build $1 million in low interest bank lines of credit. They can be used for anything, and the interest rate is low.
(Not to be confused with online lender credit lines, which have high interest rates and costs.)
Lastly, a strong business credit profile will protect your personal assets. When your business credit is strong, you can get approved for financing that does not require a personal guarantee.
Do you have any questions about building business credit? Leave it in the comments and I’ll personally answer it.
I am a Certified Lending and Credit Specialist and first gained experience fixing my own credit. My own credit scores went from the 500s to the 800s in one year. I studied economics at The George Washington University and now have my own business working with financial technology companies. I manage my own investments and live in Salt Lake County, Utah with my wife and two kids.