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How to Build Business Credit and Take Your Venture to the Next Level

Having a strong credit rating can be the make or break of any small business. It can be the difference between funding a life-changing project or simply surviving. However, lots of smaller ventures can sometimes struggle to build up good credit, or might not have a long history of operations.

Luckily, there are plenty of tips, tricks, and strategies you can use to start boosting your score today. Join us as we discover how to build business credit.


What Is Business Credit?

Just like individuals looking for funding, businesses have credit scores too. Credit bureaus such as Equifax and Experian keep detailed records of debt payments made by businesses right across the country.

The financial health of your company is represented by a score that’s measured differently by each agency. The higher the score, the better you are at paying your debts and the greater the chance you have to secure funding and loans.

Reasons for Building Business Credit for a Small Business

  • Easier to obtain finance – A high business credit score shows your company is in good shape and lenders are much more likely to approve your loan applications.
  • Get good payment terms with suppliers – Your score is a measure of trustworthiness and your suppliers and clients are much more likely to give you favorable terms when you purchase from them.
  • To separate business and personal finances – working on your business credit score helps keep things separate from your personal life. The two can be very different, although it’s important to maintain both.

Steps to Build Business Credit

Step One – Incorporate Your Business

Sole traders and partnerships are usually tied to your personal credit score. So, you’ll need to incorporate to start building your business credit score. This ensures that your venture is classed as a separate legal entity and can actually start to build credit.

You can now start applying for funding and business credit lines under the new entity’s name. Plus, incorporating gives you extra protection should your business fail as you personally won’t be liable for any losses.

Step Two – Start to Build a Business Footprint

This includes opening a separate business bank account where you’ll set up the majority of your payments. Again, you’ll be keeping things separate from your personal finances and making it easier for credit agencies to track everything business-related to ensure it impacts your score.

You’ll want to add more legitimacy to your enterprise too by getting your phone number listed in directory assistance and registering your address. The more professionally you can present yourself across as many platforms as possible the more likely you are to boost your score.

Step Three – Get An Employer Identification Number

Much like when you use your social security number to file your personal taxes you’ll need an Employee Identification Number (EIN) when filing taxes for an incorporated business.

Usually, sole traders and partnerships don’t need one, but it’ll certainly help build your credit score if you register anyway. Having an EIN ties your business performance directly to your credit score, ensuring nothing from your personal finances will interfere with it.

Step Four – Register for a DUNS Number

A Dun & Bradstreet number (DUNS) is a nine-digit code that’s used to identify your business with the credit agency Dun & Bradstreet. It’s one of the biggest credit bureaus in the US and currently holds more than 200 million financial records on file.


It’s usually the go-to agency used by lenders when deciding creditworthiness. Being registered on the platform adds another layer of trustworthiness and legitimacy to your operation.

Plus, for those wondering how to check their business credit, Dun & Bradstreet offers paid memberships where you’ll get very specific advice on the areas you’re going wrong alongside tailored advice to improve.

Step Five – Apply for Business Credit Cards

Business credit cards are the fastest, cheapest, and easiest way to build credit. They’re pretty straightforward to get, usually have low borrowing limits, and should be easy to pay off.

As long as you always meet your minimum repayments, or better yet pay your balance off in full each month, your business credit score will start to slowly tick up. Generally, the more sources of financing you have, the faster your score will increase.

However, you’ll need to make sure to select a business credit card that actually makes reports to the main credit agencies. Some bad-credit lenders don’t report and this should be made clear when you apply.

Step Six – Establish Lines of Credit

Business credit lines work in a similar fashion to business credit cards. You’re given a preset borrowing limit and you can draw as much or as little as you need at any time, only paying interest on what you borrow.

You can establish a business credit line with most lenders or you can do this directly with trusted suppliers. Once you’ve built up a strong relationship with a vendor you can ask to purchase goods on credit and request that your payments be reported to credit bureaus to build your score.

You can do this for other third parties too, making agreements reciprocal. That way each business gets to benefit from boosted scores.

Step Seven – Keep Up With Your Credit Payments

It should go without saying that failing to keep up with payments can have a negative impact on your credit score. While it takes many months of consistent, on-time payments to build even a few points of credit, one missed repayment can undo all of that work.

Of course, the size of the debt and whether or not you’ve skipped installments on a regular basis will determine how much of a hit your score takes, but it’s incredibly important not to take on debts you can’t afford.

Step Eight – Monitor Your Score Regularly

Registering with credit agencies and regularly keeping up to date on your score is an important way to ensure you’re on the right track. New information is coming up all of the time and different bureaus might have different financial data, so it’s vital to learn how to check business credit.

If you notice any discrepancies across the different agencies or something that you think just looks wrong, you should get in touch to request an amendment. As long as you’ve got evidence proving that you’re in the right you should receive an updated score.

You should try to check in at least once every few months to see what new information has been reported.

Conclusion

We hope our tips have answered how to build business credit effectively and, as you can see, it doesn’t take too much effort to get started. All of the advice on our list is quite straightforward to follow and doesn’t involve any complicated planning.

For those looking to use different types of borrowing to boost their scores, we’d recommend reading any loan agreements very carefully. Start slow and small when it comes to borrowing to ensure you’re in a position to keep up with the repayments. If you don’t, your credit score could end up taking a dive.

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