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How to Establish Business Credit
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January 8, 2024
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Two carpentry business owners discussing finances in shop looking at laptop

When your business is brand new, lenders, credit card issuers, and other sources of financing typically look at your personal credit score to determine your creditworthiness. Relying on personal credit to finance your business can limit your ability to access the capital you need to grow. The solution? Establish a business credit history.

Building a business credit history distinct from your personal credit history can open the door to opportunity. Your business credit score directly affects your ability to obtain business credit, such as loans, credit cards and small business lines of credit. A better score generally translates to larger loans, higher credit limits, and more favorable terms and interest rates.

Your business credit score can also be a factor in your relationships with potential clients or partners, who may review your credit report before working with you. Positive business credit scores can even mean paying less for business insurance. 

You should begin building a business credit history even before you open for business.

Here are seven steps to establishing business credit.


1) Choose Your Legal Form of Business.

When you operate as a sole proprietor, there is no legal separation between you and your business. Your personal credit score will be the determining factor in obtaining credit, which can make it challenging to access adequate financing. A sole proprietorship could also put your personal assets at risk if your business is sued. Forming a separate business entity, such as a C corporation, S corporation, or limited liability company not only helps protect your assets but is also the first step to establishing a separate credit history for your business.

2) Apply for a Federal Tax Identification Number.

Once your business entity is legally formed, you can apply for an employer identification number (EIN) from the IRS. This unique number identifies your business to the IRS and, despite the name, is required even if you have no employees. You can apply for an EIN online at the IRS website or complete application Form SS-4 and return it by mail to Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999 or by fax to 1-855-641-6935.

3) Open a Business Bank Account.

With an EIN in hand, you’re ready to open a bank account (or two) in your business’s name. Look for a bank or credit union that offers services you may need in the future, such as business loans, small business lines of credit, or a merchant services account to accept credit and debit cards. You’ll be establishing a lasting banking relationship, so it’s important to select a bank that can grow with your business. 
You can typically open a business bank account online or in person. Check with the bank to see what information you’ll need. Banks commonly require the following to open a business account: 

  • Your EIN
  • Your business entity formation documents, fictitious name documents, and/or ownership agreements
  • Your business license
  • Your name and date of birth
  • Address, email, and phone number for you and for your business 
  • Initial opening deposit 

4) Apply for a D-U-N-S number.

Dun & Bradstreet (D&B), one of the three major business credit bureaus, issues unique D-U-N-S numbers and uses them to identify businesses in its business credit reports. You can get a D-U-N-S number online and opt for a free registration (which can take up to a month) or pay to have your registration expedited (generally within one to five days). Once you have a D-U-N-S number, lenders, prospective customers, partners and others can use it to look up information about your business’s financial health online. 

5) Apply for Business Credit.

You can begin building a positive business credit history by applying for business credit. Business credit options available to new businesses include: 

Trade credit

Vendors or suppliers may be willing to extend credit by selling you goods with net 30, 60, or even 90-day payment terms. Choose vendors or suppliers that report your credit accounts to business credit bureaus so that your business credit score can benefit from a positive payment history. 

Small business credit cards

Before applying for a business credit card, contact the issuer to make sure the card reports your account information to business credit bureaus. 

Services

Signing up for utilities and other business services, such as website hosting, internet service, and cell phone accounts in your business’s name can help build a credit history. 

6) Pay Bills on Time.

On-time payment is the single most important factor affecting your business credit scores. Once you have established credit accounts in your business’s name, be sure to pay your bills on time. Better yet, pay early: Early payment can help boost your D&B rating. 

7) Monitor Your Business Credit Report.

D&B, Equifax, and Experian, the three major business credit bureaus, monitor business credit and generate business credit reports. Each credit reporting agency uses slightly different criteria when calculating business credit scores. D&B’s data emphasizes your payment history with suppliers, Equifax focuses on information from lenders, and Experian evaluates information from both suppliers and lenders. 

Regularly reviewing your credit report from each of the three business credit bureaus will give you a well-rounded picture of how your business credit is doing and where you can improve. You will also be able to ensure all your credit accounts are listed. If you spot any errors, you can file a dispute with the credit bureau requesting a correction. 

Unlike personal credit reports, you cannot review your business credit report for free. Experian’s business credit monitoring service provides unlimited access to your business credit report and credit score for $189 annually. D&B offers free basic credit monitoring as well as a variety of paid plans starting at $49 per month that provide more information and features. You can contact Equifax’s sales team for more information about getting a copy of your Equifax credit report. 

Give Your Business Credit 

Your personal credit score and business credit score are both essential building blocks of small business success. Take steps to build a solid business credit history from the start of your business journey. Your hard work now will make it easier to access credit and capital from partners, vendors, lenders, and investors down the road. 

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