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Building Business Credit: Proven Strategies & Insights

Updated: Nov 24, 2023

In the early stages, establishing business credit is vital for growth. But, navigating this process can be challenging, especially with unreliable sources. You may be confused or at a standstill when it comes to what steps to take in order to apply and be approved for funding.

I will go through a few steps you can take to lessen the chances you have of being denied & help ensure that you’re in a good position to be approved for a line of credit for your business. The following insights come from reputable courses, certified experts, and extensive study— it is not financial advice.

Remember, it works if you work it. Knowledge is good but applied knowledge is what can change your life.

We’ll cover:
  • Why building business credit is so important

  • How tradelines help you build business credit

  • How to establish and build business credit in a few steps

Why building business credit matters

Scaling a business requires capital. Building a strong business credit score opens doors to substantial funding—tens or even hundreds of thousands of dollars. It not only enhances funding prospects but also improves repayment terms, credit limits, and interest rates.

Although it's separate, your personal credit significantly influences approval for business funding, especially for new businesses. Hence, the emphasis is on personal credit—aiming for a strong financial profile in order to secure more significant capital.

The goal is to look good on paper so you project a strong financial image to access substantial funding opportunities.

How tradelines help you build business credit

Like with your personal credit reports, business credit reports will also have information that is directly related to your company’s credit, like payment history, account details, and public records.

That payment history can include tradelines you have opened.

Tradelines are any account opened in your business name.

Credit card accounts, personal loans, and mortgages are all examples of a tradeline that would appear on a credit report.

Ideally, you want to have at least 3 tradelines reporting and you want to be sure they're Net-30 accounts.

A Net-30 account is where you purchase something in your business's name and the company you buy it from gives you a 30-day time period to pay the invoice back.

When building your business credit you want to be sure to pay this account back before the 30-day period is up.

You want to pay it back as soon as they allow you to pay it back, remember - we are trying to look good on paper so we can get the bigger money.

➡️ Be sure to comment with any questions you may have.

How to establish and build business credit in a few steps

So, what exactly do you need to do to start establishing business credit?

Establishing business credit isn’t going to happen overnight by any means, but taking note of these few action tips will help you build business credit without feeling like you’re doing it blindly.

1. Incorporate and register your business

Most people will advise you to structure your business as a limited liability company (LLC) instead of going the sole proprietorship route. There are several benefits to doing this:

  • Easier to get funding

  • Improved interest rates on that funding

  • Better borrowing power: A business can get 10-100x more financing than an individual

  • Avoid risking any hiccups with your personal and business finances mixing up by separating your business and personal funds

2. Get an Employer Identification Number (EIN)

When you set up your LLC or C-corp you will get an Employer Identification Number (EIN), or business tax ID, which is basically your business's social security number - treat it as such.

If you decide to go the sole proprietor route, you can apply for an EIN through the IRS, it should be free, as long as your principal business is located in the United States or a U.S. territory.

3. Open a separate bank account for your business

This is crucial. As a business owner, you need to have a bank account with your business name and in order to get funding it will be a necessity - the majority of the time.

To open a business bank account, you’ll need an EIN (or a Social Security number for sole proprietors who don’t obtain an EIN), your business’s formation documents, ownership/operating agreements, and a business license.

4. Build credit with vendors and suppliers

Getting Net-30 vendor accounts (again, this means you have 30 days from the day you made the purchase to pay off your bill) with businesses that report to business credit agencies can help you build business credit.

Paying your Net-30 invoices on time (preferably early) not only helps you build good credit but also helps you establish good relationships with the vendors as a reliable client. Relationships are key in this space.

5. Make sure you’re shopping with vendors who report to credit reporting agencies

If you’re spending money shopping with vendors in hopes that are helping you establish good business credit but they’re not even reporting to the business credit bureaus - you’re wasting your money. The three major business credit bureaus are Dun & Bradstreet, Experian Business, and Equifax Small Business.

Before you shop with a vendor, make sure they report to at least one of the business credit bureaus (preferably all 3) that way you know you’re not wasting your money. Another thing to take note of is how much money you’re spending with each vendor. Some vendors will require you to spend at least $80 with them in order for them to report to the business credit bureaus. You’re a business owner, don’t be afraid to call the companies up and ASK them what their requirements are! Be sure to read through to the end, I'll give a few vendor names out.

6. Always pay your invoices and bills on time

This is as important with your business as it is with your personal credit history. Especially since we’re trying to secure funding here. Having a great repayment history will establish your credibility as a borrower. Making on-time payments can help boost your business credit score, and missing payments and paying late can drop your credit score. Not only can it lower your score but the lenders can actually drop your credit limit at any time and say you’re a delinquent borrower.

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