How to Establish Business Credit

Building Business Credit is Different Than Personal Credit

By Garrett Sutton, Esq.
When it comes to building personal credit, the process is fairly simple. Get a credit card or loan to establish your first credit reference. Pay it on time and, in the case of a credit card, keep the balance low. Within a few months you’ll likely get credit card offers in the mail. Get a second account and do the same thing you did with the first. Since most lenders report to all three credit reporting agencies (Equifax, Experian and TransUnion), you can usually build a solid credit rating fairly quickly—even with just a couple of credit references under your belt.

Finance Your Own Business
With business credit, however, the process is not as straightforward. Here’s a brief overview. These steps are described in more detail in my new book Finance Your Own Business: Get on the Financing Fast Track.

Establish a Corporate Structure</

Before you even think about building credit you should incorporate as an LLC, S Corp, C Corp or PA (professional association). I’m not just saying this because I am an attorney who helps businesses incorporate! It’s much more difficult to establish strong business credit scores, and separate your business and personal credit, as a sole proprietor.

See the video transcript.

Set Up Your Business Properly

Make sure you have an EIN, a website, and obtain the proper licenses for your business. Keep your corporate registration current. It’s important to establish a “real” business to help you build credit. And wouldn’t you want to get off to the right start anyway?

Get A D-U-N-S Number

D&B (Dun & Bradstreet) is one of the major corporate credit reporting agencies and they use an identifier called a D-U-N’S number. You can find out if one has already been assigned to your business with a search on the DNB website. If you don’t have one, you can apply for one for free on their website, or use the free Business Launcher tool mentioned below. If you plan to bid on a government contract or get a contract with a large retailer, you will likely need a D-U-N-S number, so it makes sense to apply for one now, while you are beginning the credit-building process.

Establish Accounts With Companies That Report

It can be challenging to find companies that report to corporate credit agencies. But without companies that report, you won’t be able to build business credit. Most small business credit cards and small business loans will be reported to the Small Business Financial Exchange (SBFE) and some report to Experian. Other vendors may report to D&B. If you are having trouble finding companies that report, you can use the Business Launcher tool mentioned below.

Pay Early

Commercial credit agencies look at payment history differently than do personal credit agencies. If your payment is due 25 days after the invoice date and you pay 30 days after that date, your payment history may list 5DBT (days beyond term). The best way to earn a high credit score is to make sure you pay on time, and even early if at all possible.

Make It Easier

Now for that free resource I mentioned earlier. When you get a free account with Nav, you’ll get a free personal credit rating and a free business credit rating (if your business has one). With your membership you’ll also get a free tool called Business Launcher. This tool will walk you step by step through each of the tasks required to build business credit. When you’ve completed one, you’ll mark it as done so you can easily track your progress.

Within the Business Launcher tool, you’ll also find links to lenders that report to the business credit agencies, making it simple to start building credit. And then each month you’ll get an update of your business credit rating. Hopefully you’ll see it getting stronger as you build your credit.

If you’re serious about establishing credit, I’d recommend you get a free Nav account now. (note: this is an affiliate link.) If you are looking for financing, consider a premium subscription from Nav. You’ll get more details about your credit reports and scores, so you can make a smarter decision about the best financing options for your business. The Premium Plus subscription is vital if you plan to seek financing under the SBA’s 7(a) program, as you’ll get your FICO LiquidCredit SBSS score, which will be used to prescreen your application for one of these loans.