Why don’t more small business owners establish credit for their businesses?

The likely answer is because many don’t know how to get started and where to find the right credit sources. We all pretty much know how personal credit works and what it takes to build positive FICO® scores.

The good news is the process of getting business credit is not all that different from building your personal credit. Today we’re going to simplify the business credit building process in five easy steps.

Step 1- Set up a formal legal structure for your business

Most small business owners start out as a sole proprietorship but the benefits of converting to a formal structure such as a limited liability company or corporation has many advantages.

First, it formally separates you from your business which is one of the staples to building business credit. It’s about the separation between you and your business both from a liability and financial standpoint.

As an LLC or corporation you protect your personal assets and have more privacy.

As a sole proprietor you use your personal information and social security number for everything in the business. As an LLC or corporation you use your company’s information and can even use a registered agent for the company address.

Your Employer Identification Number (EIN) is used instead of your social security number on all aspects of the business such as on credit applications, business bank accounts, business credit files, etc.

Step 2- Set up operations

Unfortunately, when it comes to setting up a business many small business owners fail miserably because they don’t have any real practical experience in setting up operations.

For starters, begin by setting up the phone number, address and bank account for the business. If you don’t have an actual storefront or office location, you can still run your business from anywhere and still have a qualifying business address by using a virtual office solution.

Next, establish the company’s web presence by first registering a domain name then setting up a company website and dedicated email address. Although these are just a few of the steps to setting up operations it by no means covers it all. Other crucial areas include but are not limited to knowing your numbers, setting up budgets, forecasts, technology, product fulfillment, customer retention, etc.

Step 3- Obtain trade credit and revolving lines of credit

You can start acquiring credit and financing for your business once a formal legal structure is established and business operations are in place.

For starters consider applying for credit with vendors and suppliers that cater to start-ups and small businesses with little to no credit history. These are known as starter vendors which usually offer net 30-day account terms and will approve almost any business for credit.

Once you open an account with a starter vendor, be sure to use the credit line on a consistent basis to grow your business and pay your invoices on time. This will enable you to build payment history and strong business credit ratings.

Important: There are over 500,000 vendors extending credit to businesses, but less than 6,000 actively report to the business credit reporting agencies. Ask your vendors do they report payments to the business credit bureaus to ensure you’re able to build business credit.

Step 4- Add existing trade references to your profile

Getting new credit is not the only way to start establishing credit for your business. The absolute fastest way to build your company’s credit file is by adding existing trade references to your D&B business credit report.

In reality, not all vendors and suppliers share payment data to a business credit reporting agency. If your business has a credit account with a non-reporting vendor or supplier then consider using a service like eCredable to add positive payment experiences to your file.

You can add the following trade references:

  • Payments for rent/lease
  • Payments to vendors
  • Utilities and gas companies
  • Landlords
  • Suppliers
  • and so much more

Step 5- Get Our FREE Bonus Playbook

The Bottom Line

How your overall business is seen by lenders, suppliers, and vendors are crucial to maximizing your funding potential. By building strong business credit files and scores the easier it will be for lenders to assess the creditworthiness of your business.

Looking for a step-by-step business credit building plan? Apply to be an FCU student and learn the steps to making drastic strides towards securing funding to exponentially grow your dreams.

17 Comments

  1. Nacira

    This was so helpful!!! I’m sooo happy I signed up for your mailing list! 🙌✨🙌✨

  2. Latanya J Jackson

    Thank you for this information. Very helpful

  3. Tammy Lee

    I don’t have a web site yet.

  4. Prentice Mccormick

    great information about building business credit. Thank you.

  5. Shantel Rouzer

    I’m trying to build my businesses credit. I paid spotlight finding a lot of money and now I’m at a stand still.

  6. Burnetta Hood

    Thanks very helpful

  7. Tena L Cox

    Where are how do i get a Dunn number

  8. Janice Boyd

    Hi i have a home daycare i would like to have some business credit i have my EIN number and i Just got my D-U-N-S Number. When i got my D-U-N-S the person that help said i need some others that would help out that would cost me about $800.00 do i need that also. I don’t have a website.

  9. Melvin Wade

    I have a opportunity for my company to grow

  10. Corey

    Love it beautifully put although I know this info

  11. Rodney Taylor

    Help

  12. Denise Boykin

    Very helpful thanks so much

  13. Latisha Drummond

    Thank you , I haven’t created the Llc yet but i only have my EIN

  14. Kimberley Baines-Holder

    Thank you so much! Very informative

  15. Anita Toliver

    Very informative. Thank you so much!!

  16. Tyree Largent

    Yo this lady got the sauce I swear to God I always check things like this to make sure they legit and she right on point with EVERYTHING yall listen to her she knows what she’s talking about salute

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