How To Build Business Credit Without Using Personal Credit

A major step in any business is finding financing and that’s difficult to do without having business credit. One problem many business owners face is building business credit when their personal credit score isn’t great. 

Lenders look for good personal credit scores to lower their risk when lending to new businesses. It might take some work, but you can find a lender that only needs your EIN to qualify for credit cards, loans, and other options. 

There are several steps you can take to build your business credit without a personal guarantee. We’ll show you exactly how it’s done. 

Step 1: Choose A Company Name And Contact Information

This step might seem like common sense, but many small business owners do it wrong. Your clients need a way to find your business when they’re ready to spend money with you. So a variety of contact information is key to building your small business. 

Choosing a name might be the hard part, especially if someone else already has a business registered under that name. You can do a quick search online to see if that’s the case. 

You’ll want to have the following information for your business: 

• Business name
• Phone number
• Business address
• Professional email
• Website address

All of the above information needs to be completely separate from your personal information. There are business lenders that will deny your application if they see that your personal address and business address are the same. 

Similarly, your email address should be connected to your business website, not a free gmail or yahoo account. 

Presenting a professional image for your business sets the foundation for customers, investors, and lenders to take you seriously. 

Banks regularly check to ensure that your business is legitimate as part of their due diligence before lending out money. They may perform online searches, verify the business phone number, and may even make a visit to your storefront (if you’re a retail business). 

Most business credit coaches advocate that you get your business listed in the 411 directory as well.

Step 2: Establish a Business Entity

Nailed down a name and listed your contact information? Now it’s time to register your business entity with the state. You have to make it official so your business is a separate entity from you personally.

Registering your business as a legal entity is an easy process. Most times it can be done online through your state’s website for a moderate registration fee. If your industry requires professional licenses, be sure to have those in place ahead of registering.

Depending on how your business is legally classified, you’re able to create a separate entity from your personal identity. With a sole proprietorship, that’s not possible. You’ll have to file for a limited liability company (LLC), small business corporation (S-Corp), C-Corporation or LLP to achieve that. 

Just because you have your business registered with the state doesn’t mean you’re building business credit. Although this makes your business legitimate, there are a few more steps before you start building credit.  

Again, this is important because many business lenders won’t lend to sole proprietors. Filing an LLC in most states is cheap and easy – don’t skip this step! 

Step 3: Get An EIN Number For Your Business

Next up is your EIN. Registering your business may have cost you something, but luckily this part is free. Your EIN is an employer identification number and is only issued by the Internal Revenue Service (IRS). 

Getting an EIN from the IRS’s website is super easy and quick. It only takes a minute or two (literally), and their website grants it to you immediately. 

It tells the government and credit bureaus that you’ve opened a business. If the credit bureaus don’t know you’ve started a business, then they can’t create a credit profile for you.

Getting an EIN is also important because it acts as an identifier for your business similar to how your SSN identifies you as a person. You’ll need it to:

• Open business bank accounts
• Get a business credit card
• Apply for loans, grants, and other financings
• File taxes and report employee wages

Typically when applying for a business credit card or a loan, the financial institution will ask for your SSN to complete the application. The problem is that it makes you personally liable for the credit account instead of your business. That’s not what you want. 

Look for banks and lenders that accept EIN-only applications. This is the best bet for building credit under your business. 

Step 4: Open Up A Business Bank Account

Your business bank account helps keep your business and personal funds separate. At least that’s the idea behind it. It only works that way if you strictly use the account for business expenses and deposits. While you’re at it, a savings account won’t hurt either. 

Opening a business checking account doesn’t have the same effect on your credit as opening a credit card or loan, but it does establish a connection between your business and the bank you’re working with. 

Applying for a business credit line without business credit? During your application process, the lender may look at the average balances in your business account to help them decide between approval and denial. 

This isn’t the case with all lenders, but some do require a substantial balance in the bank account to approve your application