Unlock the Benefits of Business Credit for Your Small Business.
Discover how building business credit can unlock a world of opportunities for your small business. From easier financing to better supplier terms and lucrative contracts, a strong business credit profile is a game-changer.
In this guide, we'll walk you through simple steps to establish and build your business credit, setting your small business on the path to success.
The Importance of Establishing Business Credit
Getting your own business credit reports and scores are very important. Having good business credit can benefit you in several ways. It can help you qualify for small business loans or financing, and even secure better terms or lower interest rates. Plus, other companies, lenders, and suppliers can check your business credit to determine whether they want to do business with you. But here's the catch - you may not always know when your business credit is being reviewed, so it's crucial to stay informed about how it's affecting your business. And don't be fooled by the misconception that having good business credit means your personal credit won't be checked.
Personal Credit....just as important
Many small business lenders do check personal credit, and certain types of loans may require a personal guarantee. Staying in control of your personal credit it's just as important even more so if you are a new business with less than 5 years of being established. Personal credit can open the door to those initial credit cards and loans that help you build a strong business credit, so stay on top of your personal credit, and if it needs to be fixed there are many tools nowadays that help you get it back on track. Before you spend thousands of dollars on credit repair companies, you can do it yourself with Dispute Bee or other software that can help you deal with credit bureaus directly. Credit bureaus like to hear from clients directly rather than credit repair companies, giving you a better chance at fixing your personal credit to build a foundation for your business credit.
How Can I Build Business Credit?
Business credit is reported to major credit bureaus such as Equifax Small Business, Experian Business and most important Dun & Bradstreet. In order to build business credit you need to do business with companies, banks and lenders that report to credit bureaus your payment history with them. Although this sounds logical you will find that companies and banks only report to one, all or none of the credit bureaus making it cumbersome at times to make sense of where your business credit is going. For this reason, Dun & Bradstreet is the one credit bureau that most lenders and banks use to evaluate a business's creditworthiness.
What Is Needed To Start Building Business Credit?
First and foremost you need to operate under a business name, meaning you have an EIN under which you file corporate taxes. If you need help with business formation you can contact us to guide you in setting up your business. Your business needs to be set up properly with an EIN, business address, phone number, licenses and permits for the industry you operate in.
Although most credit bureaus will use the EIN to identify your business for credit reporting, you will need to get a free D-U-N-S number to build credit with Dunes & Bradstreet. You do not need to pay for expedited services if you are ok waiting 30 days to receive your number. Your D-U-N-S number will allow your company to start building a PAYDEX score (business credit score) that ranges from 1-100 (100 meaning having a perfect payment history). This score helps banks, lenders, vendors, and suppliers know the creditworthiness of your business to approve you for financing.
What Credit Accounts Can I start With?
Before you go out and start applying to credit cards and loans consider a few things.
One is to consider if your personal credit good enough. Most banks and lenders like to see personal credit scores over 640 to start offering financing. Other institutions may start at 550 but these loans may be costly and only worth taking if there is a great opportunity at hand not to cover shortfalls. SBA loans require a 680 and you get the best terms if you are above 720 with most lenders.
Although at some point you start separating personal credit from business credit a good way to do so is to start creating some credit lines that will help your business credit grow independently of your personal credit. To do this you can open business credit accounts such as net 30 accounts (meaning a company allows you to buy their product and pay it within 30 days of purchase) this allows for companies to report your payments to credit bureaus such as D&B to quickly grow your PAYDEX score and start separating your personal credit from business credit.
Please be advised that each company you get credit with is responsible for reporting credit information to the credit bureaus they work with, this list of companies may change at any time and companies may change their credit reporting practice without us knowing.
1. Newegg Business net 30 - Office Electronics
2. Quill Credit net 30 - Office Supplies and Furniture