How to Build Business Credit Fast: 6 Simple Steps

Managing business finances can be a daunting task, and credit is often one of the first areas where small business owners falter. But by establishing good business credit, you can take an important first step in establishing a dividing line between your business and personal finances. By understanding how business credit works, and keeping your credit score healthy, you can take control of your finances and grow your business at the same time.

How to build business credit

1. Establish your business.

2. Register your business with your secretary of state.

3. Get your EIN.

4. Open a business bank account.

5. Establish net 30 tradelines

6. Borrow from lenders that report to the business credit bureaus

What is business credit, and why is it important?

It facilitates the separation of personal and business finances.

Creating business credit helps you leverage credit under your business name only, which will help separate reporting from your personal credit. A business credit report provides you with a clean report of the company’s credit inquiries, lines of credit, and delinquencies. It offers a clear picture into the financial condition of your business. Fraud monitoring is easier, and lenders can more effectively assess creditworthiness. Moreover, keeping your personal credit rating separate keeps it safe. Annual inquiries and lines of credit are common with your business so all payment history, utilization rate and inquiries stay on your business credit, not your personal .

Better financing options.

How much financing you are able to get may be determined by your business credit report and score. As well, to calculate premiums for commercial insurance, some insurers examine a company owner’s credit as well as the company’s. Lastly, vendors and suppliers may review a company’s credit scores to decide how long they should give the company to pay open invoices from 30 days terms (net-30) to 60 days to pay under (net-60). A excellent strategy to improve cash flow is to negotiate longer terms with suppliers so you don’t have to operate on a cash basis.

How does a business credit score work?

What factors go into a business’ credit rating?

Business credit scores are calculated using the following factors. However, each scoring model is unique, and some of these factors may be disregarded or not utilized at all.

Debt and utilization rate

Age of credit history

Payment history

Industry type

Company size

Types of tradelines

Several of the same aspects as a personal credit score, such as payment history and amount of debt utilized, are considered in a business credit score. Credit scores, on the other hand, are calculated using various scoring algorithms. Dun & Bradstreet PAYDEX Score and Experian Intelliscore Plus scores range from 0 to 100, and the higher the score, the greater it is. The FICO SBSS score will be used for bank term loans, lines of credit, and commercial loans up to $350,000 from the Small Business Administration (SBA). The minimum score to pass the SBA’s pre-screen process is currently 140.

Ways to improve your company’s credit score

Once your business is established, the next step would open Net-30 accounts, these are accounts that extend you 30 days to pay the bill in full after you have purchased products. Net 30 accounts allow you to buy now and pay later. Commonly known as vendor credit, supplier credit, and trade credit. Vendors that report those payments to commercial credit agencies help your company establish strong business credit scores.

Each vendor account listed here offers a wide variety of products that many businesses can use. By purchasing items you need for your business on payment terms and then paying on time, you may build a positive business credit references.

Here are some easy to start net 30 accounts:

1. Nav.com– Monitor and build business credit with business boost $39.99/m. Payment gets reported to Experian, Equifax and Dunn & Bradstreet business credit bureaus. Think of Nav like CreditKarma or similar credit monitoring apps, but for Business!

2. Shirtsy.com Provides all of your print on demand promotional and apparel products on net 30 day terms. Create business cards, company t-shirts or just company coffee mugs all in one place! They report to Dun & Bradstreet, Experian, Equifax, Credit Safe, SBFE, Ansonia and NACM. There is no personal credit check. Shirtsy’s Net 30 Membership comes with an annual fee of $99 to report to the bureaus. 

3. BP Mastercard- Use this fuel card for your company vehicles and earn points and rewards for fueling with BP or Amoco stations. Monthly $8 fee, reports to Experian & Dunn & Bradstreet. After 12 months of good payment history BP can upgrade your account to a full revolving credit line under Mastercard.

Note that while we do our best to provide you with helpful information, ultimately it is up to each company to report and we cannot guarantee any specific results by using the services of these vendors. 

Where to check your free business credit score

While there are dozens of free credit score and free credit report resources available for consumers, it gets tricky when you look for business versions. Dunn & Bradstreet Credit signal offers a free business credit score, but you may not get the full picture compared to a service that requires you to pay.

Conclusion

Credit is one of the most important factors when it comes to business growth. By building good business credit, you’ll be able to get the financing you need to expand your business and take your business to new heights. Make sure to follow these steps, apply for business financing options that report to business credit and you’ll be well on your way to building good business credit!

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