As a small business owner, you are busy each day just managing everyday operations. It’s important, however, that you find time for one more detail: building your business credit. If you hope to expand your business anytime soon, you will need good business credit.

How Does it Help You to Build Business Credit?

In many ways, business credit works like personal credit. When you have a good rating, it gives you better terms on many things, including the interest rates and insurance premiums you pay. You can also get better terms on leases and business loans. In many cases, you can obtain better payment terms from the sellers you deal with, as well. In other words, a good business credit rating is vital to nearly every aspect of your business.

Building Business Credit Helps You Separate Work from Personal Life

business creditMost entrepreneurs blur the lines between their business lives and personal lives. They may use their personal credit cards for their business, for instance.

Sometimes, a little mixing becomes unavoidable — you may need to sign a personal guarantee when you apply for a business loan or credit card. When you are able to build good business credit, however, you are able to apply for these things without a personal guarantee. Your personal assets, then, would not be at risk.

How to Build a Good Business Credit Rating

Before you build a high business credit rating, you must first check to see if your business has any credit at all. There are three major business credit bureaus in operation — Experian, Dun & Bradstreet and Equifax. You can either buy a copy of your credit report directly from these bureaus or obtain them through various companies that offer access to them for free.

Once you have your credit report, you need to take a few steps.

Begin to Build

When you go to check your business credit, it’s possible you will find there is none. Your business could simply be too new to have it, or you may have only used personal credit for your business so far. To begin building your credit as a business, you’ll need to incorporate your business, get an EIN (employer identification number) from the IRS, get a business bank account, and a business telephone line. Finally, you must register with Dun & Bradstreet, the credit bureau.

Business credit reports can also begin to take shape from legal filings in lawsuits your company is involved in, and from public records. The record your business establishes for on-time payment, however, is the most important thing it can do to build a good credit rating.

Get a Business Credit Card and Open Accounts with Vendors

The best way to build business credit is to create a track record of good payment with business vendors. One of the easiest ways to get started on this plan is to apply for a business credit card and to make timely payments. The fact that these credit cards come with rewards programs is a perk.

It’s important to find vendors who send your payment information to the business credit bureau and open accounts with them. Once you do have such accounts, you need to pay your vendors on time. You need to remember it’s only possible to get the highest possible credit rating if you pay early.

Finally, you can improve your rating by using your business credit cards for improved cash flow. When you use the grace period wisely, you can get by paying with no interest at all.


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