9 Ideas on How to Build Business Credit Fast

9 Ideas on How to Build Business Credit Fast
Taylor Gordon
on June 6, 2017
Read in 6 min

If you want to learn how to build business credit to access better financing options, this is the article for you.

As you’ve probably discovered, a strong business credit profile can open doors to any number of untapped business opportunities.

A high business credit score can help you attract customers, secure investors, lease equipment, get access to affordable small business loans, and more.

Getting denied for financing because of your business credit score is frustrating and disheartening.

It can even be detrimental to your business’s future.

In this post, we’ll share how to establish business credit so you can get your hands on the business funding you need.

Before heading into the guide, if you want to learn the intricate details of what your business credit score is and why it’s important, read this post on why your business credit score matters.

How to Build Business Credit – 9 Easy Steps

1. Stay On Top of Payments

Business credit isn’t the same as personal credit.

However, there are some parallels in what factors are reviewed to determine your creditworthiness in both areas.

Creditors and suppliers want to see that your business has a track record of paying bills on time before they take the risk of extending you credit.

On-time payments will show that you’re dependable which has a positive impact on your business credit score.

The first key step to take in improving your business credit score is paying bills faithfully (or even early.)

Set calendar reminders for due dates or consider scheduling auto-payments to avoid missed payments.

2. Make Sure Your Business Exists

If you’re completely new to the world of how to build business credit, there are some formalities you need to take care of to legitimize your operation in the eyes of creditors.

This requires more than simply hanging out your “open for business” shingle.

You need to prove you have a functioning business that’s separate from your personal finances to build business credit and to qualify for business financing.

Apply for an EIN (employer identification number) if you haven’t already.

Your business EIN is primarily used for identification and tax purposes, but it’s also essential in establishing business credit history.

You should also get:

  • A separate business phone number
  • A P.O. Box (if you don’t have a physical business address)
  • A business bank account that you’ll use to manage your cash – we like these banks for small business

Lastly, consider forming an official business entity (LLC or INC) to legally divide your business and personal interests.

Choosing not to go this route means that your business and personal credit history are largely viewed as the same.

Lenders may be less keen on offering you a small business loan without a distinction between the two.

3. Add a Business Credit Card to Your Wallet

Building business credit is sometimes as simple as opening one or a few credit cards under your business’s name.

Business credit cards are often easier to get approved for than other forms of financing, so it’s a good place to start.

Ensure you take out a business credit card with a credit card company or bank that reports payments to the major credit reporting agencies.

Never borrow more than your business can afford; that’s not how to build business credit up.

Charging more on your business credit card than you can pay off will hurt more than help you in this endeavor.

4. Apply for Small Business Loans

Just like business credit cards, taking out small business loans regularly is a good way to build your business credit.

Of course, you need to make payments on time for this to have a positive impact on your credit score.

Your lender also needs to report your payments to credit reporting agencies.

Keep in mind, some lenders never report to credit agencies, and this is something you need to ask about when shopping around for loans before moving forward.

The good news is that most alternative lenders do report your payments.

So do most banks, but traditional loans are going to be much harder to come by if your business credit score is lacking.

Funding Options APR Do you qualify? Time in Business Annual Revenue
Funding Option
Get Started
APR
5-50%
Estimated Apr
Do you qualify?
500
MIN CREDIT SCORE
Time in Business
At least 6 months
Annual Revenue
At least $100K
Funding Option
Learn More
APR
1.5% - 10%
Monthly Fee Rate
Do you qualify?
N/A
MIN CREDIT SCORE
Time in Business
At least 1 year
Annual Revenue
At least $50,000

5. Get Friendly With Your Vendors and Suppliers

You likely interact with both vendors and suppliers on almost a daily basis when running a business.

Establishing relationships with them can help you build credit.

Vendors or suppliers who trust you may agree to offer inventory or services without making you pay for it in advance.

An agreement where you’re able to pay several days or weeks after receiving a service or inventory is called a trade credit.

You can improve your business credit score with trade credits if vendors report payment history to credit reporting agencies.

Again, vendors aren’t required to report these payments.

You may have to reach out to reporting agencies to notify them of the agreements.

Anyone can benefit from knowing how to build business credit in this way, even if you run a micro-business with limited expenses.

Here’s what to do:

    • Run through the expenses that you have each month to see who you’re paying.
    • Pick out a few companies (even small ones) that you pay on a regular basis like office suppliers,  cleaners, or shipping companies.
    • Work up a payment agreement with a handful of these service providers or vendors and always pay on time to prove you are a reliable debtor.

6. Monitor Your Credit Report Like a Hawk

Continually monitor that all items on your business credit report are correct.

Reporting agencies can make mistakes when inputting the credit data.

Data can be incomplete as well.

Any mistakes or incomplete records you find that impact you negatively should be spotted and rectified as soon as possible with a complaint to the credit reporting agency.

Catching errors isn’t the only reason to stay vigilant.

Monitoring your credit report regularly will give you a sense of what actions impact your credit profile positively so you can repeat the same behavior.

Also, you want to always make sure your credit score is trending in the right direction — upward.

7. Review Data Across All Credit Reporting Agencies

There are multiple credit reporting agencies who collect data and calculate business credit scores.

The agencies are Equifax, Experian, and Dun & Bradstreet.

The credit reporting system for businesses isn’t as straightforward as the personal credit reporting process.

As mentioned, companies and creditors may not report to agencies which can skew the data.

One creditor may even report a different type of data than another entirely.

Furthermore, each of the credit agencies has their own formula for coming up with credit scores.

Business credit reports and scores are open for anyone to view if they’re willing to pay.

You can never tell which credit report a creditor, vendor, potential customer, or investor will pull to get a sense of your creditworthiness.

For this reason, be aware of what’s on your reports from all three reporting agencies and update your business information on each regularly.

8. Keep Tabs on Your Public Records

Another part of your credit history to keep tabs on besides payment history are your public records.

Public records related to your business may involve bankruptcy, liens, or judgments.

A negative ruling on a debt collection case or bankruptcy will likely make someone wary of doing business with you.

Your job is to avoid these situations in the future and to make sure your report has no harmful public records on it at present that are inaccurate.

9. Detach Personal Finances from Business Finances Completely

Separating your personal finances from your business finances plays such an important role in helping you establish business credit that we can’t stress it enough.

If you pay for business items with the same personal credit card you use to stock up on groceries for your household, you’re not building business credit.

You need to divide your personal money from your business money to improve your business credit score and for creditors, investors, and suppliers to take you seriously.

Building credit isn’t the only reason to divide your personal and business finances either.

Creating a separation between yourself and your business with different bank accounts and by forming an INC or LLC protects you from being personally liable if your business has financial trouble.

The steps you have to take are fairly simple:

  • Open lines of credit, credit cards, and bank accounts in the name of your business.
  • Deposit income from your business into a business bank account before paying yourself.
  • Pay bills from your business accounts only.
  • Check your state government website for instructions on how to form a business entity.

How to Build Business Credit – Final Thoughts

Getting access to affordable funding is necessary for any business to succeed.

Having no business credit history or poor business credit history can put a wrench in your business plans, so knowing how to build business credit and taking the steps above are crucial.

Once you’ve successfully built up your business credit, you can say ‘hello’ to many more financing opportunities.

Funding Options APR Do you qualify? Time in Business Annual Revenue
Funding Option
Get Started
APR
5-50%
Estimated Apr
Do you qualify?
500
MIN CREDIT SCORE
Time in Business
At least 6 months
Annual Revenue
At least $100K
Funding Option
Learn More
APR
1.5% - 10%
Monthly Fee Rate
Do you qualify?
N/A
MIN CREDIT SCORE
Time in Business
At least 1 year
Annual Revenue
At least $50,000

Taylor Gordon Finance Journalist

Taylor K. Gordon is a personal finance writer and founder of Tay Talks Money, a frugal lifestyle blog on entrepreneurship and hacking your way to an abundant savings account.

Taylor has contributed to The Huffington Post, GoGirl Finance, Madame Noire, The Write Life, and more.

Recommended for Business Loans
Lendio
Lending Express

Important Disclosures. Please Read Carefully.

Persons facing serious financial difficulties should consider other alternatives or should seek out professional financial advice. This website is not an offer to lend. Lendgenius.com is not a lender or lending partner and does not make loan or credit decisions. Lendgenius.com connects interested persons with a lender or lending partner from its network of approved lenders and lending partners. Lendgenius.com does not control and is not responsible for the actions or inactions of any lender or lending partner, is not an agent, representative or broker of any lender or lending partner, and does not endorse any lender or lending partner. Lendgenius.com receives compensation from its lenders and lending partners, often based on a ping-tree model similar to Google AdWords where the highest available bidder is connected to the consumer. Regardless, Lendgenius.com’s service is always free to you. This service is not available in all states. If you request to connect with a lender or lending partner in a particular state where such loans are prohibited, or in a location where Lendgenius.com does not have an available lender or lending partner, you will not be connected to a lender or lending partner. You are urged to read and understand the terms of any loan offered by any lender or lending partner, and to reject any particular loan offer that you cannot afford to repay or that includes terms that are not acceptable to you. By submitting your information via this website, you are authorizing Lendgenius.com and/or lenders and lending partners in its network or other intermediaries to do a credit check, which may include verifying your social security number, driver license number or other identification, and a review of your creditworthiness. Credit checks are usually performed by one of the major credit bureaus such as Experian, Equifax and Trans Union, but also may include alternative credit bureaus such as Teletrack, DP Bureau or others. You also authorize Lendgenius.com to share your information and credit history with its network of approved lenders and lending partners. For qualified consumers, our lenders offer loans with an Annual Percentage Rate (APR) of 35.99% and below. For qualified consumers, the maximum APR (including the interest rates plus fees and other costs) is 35.99%. All loans are subject to the lender’s approval based on its own unique underwriting criteria. Example: Loan Amount: $4,300.00, Annual Percentage Rate: 35.99%. Number of Monthly Payments: 30. Monthly Payment Amount: $219.36. Total Amount Payable: $6,581.78 Loans include a minimum repayment plan of 12 months and a maximum repayment plan of 30 months. In some cases, you may be given the option of obtaining a loan from a tribal lender. Tribal lenders are subject to tribal and certain federal laws while being immune from state law including usury caps. If you are connected to a tribal lender, please understand that the tribal lender’s rates and fees may be higher than state-licensed lenders. Additionally, tribal lenders may require you to agree to resolve any disputes in a tribal jurisdiction. You are urged to read and understand the terms of any loan offered by any lender, whether tribal or state-licensed, and to reject any particular loan offer that you cannot afford to repay or that includes terms that are not acceptable to you.

Lender’s or Lending Partner’s Disclosure of Terms.

The lenders and lending partners you are connected to will provide documents that contain all fees and rate information pertaining to the loan being offered, including any potential fees for late-payments and the rules under which you may be allowed (if permitted by applicable law) to refinance, renew or rollover your loan. Loan fees and interest rates are determined solely by the lender or lending partner based on the lender’s or lending partner’s internal policies, underwriting criteria and applicable law. Lendgenius.com has no knowledge of or control over the loan terms offered by a lender and lending partner. You are urged to read and understand the terms of any loan offered by any lenders and lending partners and to reject any particular loan offer that you cannot afford to repay or that includes terms that are not acceptable to you.

Late Payments Hurt Your Credit Score

Please be aware that missing a payment or making a late payment can negatively impact your credit score. To protect yourself and your credit history, make sure you only accept loan terms that you can afford to repay. If you cannot make a payment on time, you should contact your lenders and lending partners immediately and discuss how to handle late payments.