Building business credit is an important aspect of establishing a successful business. A strong credit profile can help a business secure loans, lines of credit, and other forms of financing, which can be crucial to the growth and stability of a company.
Establish a separate business entity: The first step to building business credit is to establish a separate legal entity for your business, such as a limited liability company (LLC) or corporation. This will help you keep your personal and business finances separate, which is essential for establishing good business credit.
Get a business tax ID number (EIN): You will need a tax identification number (EIN) from the Internal Revenue Service (IRS) to apply for credit as a business. An EIN is also known as an Employer Identification Number (EIN) and can be obtained for free from the IRS website.
Open a business bank account: Having a separate business bank account helps demonstrate to lenders and creditors that your business is a separate entity from your personal finances. Make sure to deposit all business income into this account and pay all business expenses from this account.
Register with business credit bureaus: To establish a business credit history, you need to register with business credit bureaus, such as Dun & Bradstreet, Experian Business, and Equifax Business. These bureaus collect information about your business, including payment history and credit usage, to create a business credit report.
Apply for a business credit card: Applying for a business credit card is an easy way to start building business credit. Use the card regularly, make payments on time, and keep the balance low to help establish a good payment history.
Build relationships with suppliers: Building relationships with suppliers can also help establish your business’s creditworthiness. Some suppliers may extend trade credit, which can help you build a positive payment history with them and potentially boost your overall business credit score.
Monitor your business credit reports: It’s important to regularly monitor your business credit reports from the major business credit bureaus to ensure accuracy and detect any potential errors or fraudulent activity.