7 Steps to Getting Business Credit

We likely all understand how to get and build personal credit. But building business credit can often seem like a mystery for many small businesses.
March 07, 2011

We all understand how to get and build personal credit: Pay your bills on time. Don’t have too much debt. But business credit? That often seems like a mystery for many small businesses; a seemingly foreign and exotic world to many small business people. But it need not be. The actual process of getting business credit is in fact not dissimilar to building your own personal credit profile, only you do it in the name of the business.

Here’s how:

1. Incorporate:

The first thing to understand is that to build business credit, you must separate your business and its finances from your own personal credit. That in turn means you must have a business that is a separate legal entity from you. It cannot be a sole proprietorship or regular partnership since those are not separate legal entities. No, the business must be either a corporation or a limited liability company (LLC).

By creating a separate entity, you allow your business to have a legal structure and credit rating apart from, and different than, your own.

2. Get an Employer Identification Number: 

Issued by the IRS, an EIN is the business equivalent of a Social Security number. If you don’t have one, get an EIN from the IRS.

3. Get a DUNS Number

Issued by the main adjudicator of business credit, Dun & Bradstreet, a DUNS number is your business’ credit profile number.

4. Go to the bank and open up two accounts: 

The first is a standard checking account. Again, this must be separate from your own personal checking account. Create it using the business name, EIN, DUNS number, business address, and so on.

Second, open up a savings account or CD tied to the business checking account. Put some money in it.

5. Obtain vendor credit:

Once you have all of your numbers and accounts in place, you can begin the actual process of building your business credit profile. Begin with the phone company – put your business phone number in the name of your business, and not you personally. If you have utility bills through your business, do the same thing.

See if your local office supply store will give your business a small credit line in the name of the business. Maybe one of your suppliers or vendors will do the same.

6. Get a loan:

Use that bank savings account or CD to obtain a small loan from the bank again, in the name of the business.By securing the loan with the business savings account, you 1) give the bank every reason to say yes to your loan request, and 2) really begin to build business credit by showing that you received and are repaying a business loan from a bank.

7. Pay on time:

Repay all of this credit you ask for on time, and in full.

Before you know it, your business will have a strong track record and solid business credit rating. You can then use that to gain additional business credit as necessary.