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How to Build Business Credit for a Small Business Fast

small business credit score

Many entrepreneurs are unaware that businesses are given credit ratings, just like private individuals.  A credit rating indicates the risk of loaning money to your business.  It is arrived at based on the business’s payment history and credit utilization.  The primary business credit bureaus in the U.S. are; Experian, Equifax, TransUnion, and Dun & Bradstreet (D&B).

small business credit score

If you have an established business, chances are, it has a credit score even if you’re not aware of it.  Business credit ratings don’t make use of as many factors as private ratings and can be easier and faster to improve.  (Note, though, that bureaus are not required by law to address business credit report errors the way they are for individuals.)  Some reasons it is useful to have a good business credit rating are:

  • To protect the business from the personal credit ratings of the owners. If you, or your partners, suffer from poor credit scores, your business won’t be affected by it.
  • To make it easier and cheaper to get business financing. Banks and other lenders look at a business’s credit report when deciding whether to grant loan funding.
  • To get preferential terms from suppliers. With a good credit score, your suppliers are more likely to extend you credit terms and allow you to pay for goods after delivery.
  • To lower your insurance premiums and get access to better products. Insurance companies regard businesses with good credit scores as better insurance risks.

Seven steps to getting a business credit score:

Register your business

There is no distinction between you and your business if you are trading as a sole proprietor or partnership.  Your personal credit score will be the business credit score, and if the business can’t meet its obligations, your personal assets will be at risk.  Incorporating your business as a limited liability company (L.L.C.) or a corporation will officially make your business a separate legal entity.

Obtain an E.I.N. number

A federal tax identification number (E.I.N.) from the I.R.S. is like a social security number for your business.  It will be required to open a bank account, apply for credit, and pay taxes.

Get a business address and phone number

Having a separate address and phone number for your business helps to establish it as a separate entity from the owners, and will look professional.

Open a business bank account

Open a business checking account to keep personal and business finances separate and establish a banking history that can be given to potential lenders.

Get a business credit card

Get a business credit card or another line of credit and adhere strictly to payment terms.  Be sure to make any payments from your business checking account, never your personal accounts.

Register with the credit bureaus

Open a business credit file with the major business credit bureaus and get a D.U.N.S. (Data Universal Number System) number from D&B.  They may have a file for you already, but registering will make it easier to communicate about any errors.

Get trade lines with suppliers

Many vendors will allow customers to pay for goods after delivery and report payment patterns to credit bureaus.  Choose three to five suppliers who share their data with credit bureaus, then make payments on time.     

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