How to Build your Business Credit

When running a business, it can be difficult to secure the funding you need using just your personal credit. The needs of a business are often far more expansive than those of a single person. For example, you may need cash for research and development, capital expenditures, expansion, staffing or just plain survival.

Furthermore, when your personal and business finances are intertwined, it puts all of your assets at risk. The best route is to establish good business credit that will enable you to access funds at affordable rates when you need them.

How to establish business credit

The first step in building your business credit, according to Experian, is incorporating your business by forming a Limited Liability Company (LLC). This is a hybrid type of legal structure that ensures your business is seen as an independent business entity.

Next, you will need to get a federal Employer Identification Number (EIN), which you can apply for online. Then, open up a bank account and a phone number in the legal name of the business. Make sure that the phone number is listed so that it can be found in 411 directory assistance.

Once you’ve completed these steps, contact Experian, TransUnion, Dunn and Bradstreet and Equifax to open credit files for your business.

Tips on building business credit

With fresh credit files open, it’s time to start building positive records. Here are a few ways you can do so.

Get a business credit card

One of the easiest ways to start building business credit is to get a credit card in the name of your business. Shop around for a card that reports to the business credit bureaus and offers good perks. Here are a few cards we recommend.

Spark Classic from Capital One

This card from Capital One is for business owners with at least average credit. When applying, it will request your business and personal information. It does report to the business credit bureaus and may also report to consumer credit bureaus. Paying your bills on time and staying under your credit limit will help you build good credit. Perks include unlimited 1% cash back on all purchases, no annual fee and other business benefits.

Chase Ink Business Cash Card

The Chase Ink Business Cash Back card can also help you build your business credit, as they report to the business credit bureaus in addition to the personal credit bureaus. Benefits include no annual fee, $300 bonus cash back when you spend over $3,000 on purchases in the first three months, up to 5% cash back on purchases (up to $25,000 per year) and other travel benefits.

Enhanced Business Platinum Card

This is a charge card from American Express which is designed for frequent international travelers and big spenders who want to build their business credit. While carrying an annual fee of $450, it does offer some great benefits.

The card has a membership reward point program through which you earn one point for every dollar spent on eligible purchases, one and a half points per dollar spent on qualifying purchases over $5,000 and five times the points for every dollar spent booking on the American Express Travel website. It also offers a 50% airline bonus, $200 credit per year for baggage fees, access to over 1,000 airport lounges around the world, concierge services, no foreign transaction fees and more.

Review and compare more business credit cards and be sure to check the fine print to ensure they report on business credit.

Establish credit with suppliers or vendors

If you work with suppliers or vendors and make purchases on credit, you can ask the third-party to report the trade line to the national credit bureaus. According to the U.S. Small Business Administration, you can often get products like computers, office supplies and marketing materials from major brands and can delay payment from 30 to 60 days. If your suppliers or vendors report to the bureaus for you, those relationships can help you to build your credit as long as you make timely payments.

Take out a business loan

A business loan is another viable option for building up your business credit. While it can be challenging to get approved with traditional banks, online lenders are much more lenient and convenient. Even if the loan is small, it can help you build a positive credit line for your business. However, when choosing a lender, be sure to look for one that reports to business credit bureaus.

OnDeck is one such company. It is a provider of online business loans that has delivered over six billion dollars to small businesses around the globe. It offers term loans up to $500,000 and lines of credit of up to $100,000. Applying online is easy and the whole loan processing can be completed in as little as one business day. They will send monthly updates to both Experian and Equifax.

Review and compare more business loan companies. 

Pay your bills on time

You don’t want to go through all of this trouble establishing your business credit only to have negative marks on your report. It will be important to all of the credit bureaus that you pay your bills on time, or, preferably, early.

Aside from that, the bureaus will vary in what they consider important, but it’s good practice to try and avoid any negative public records, such as a lien or bankruptcy. Also, be mindful of your credit utilization ratio, as you don’t want all of the credit you have to be used. Experian recommends keeping the amount of credit utilized at a maximum of 30% of the total credit available to show.

Start building your business credit

Now you know the basics of building business credit. Follow these steps and you can secure the future of your company. Not only will it provide financial security, but it will also separate your business and personal finances. This simplifies tax season and ensures a personal financial mistake won’t impact the business, or vice versa. Start building your business credit early, and you will have a strong foundation from which your business can move forward.

Best Business Credit Cards

Credit CardAnnual FeeSignup BonusRewards 
$0$3005% cash backApply
$0No Signup Bonus1% cash backApply
$59 (waived first year)$500 (50,000 miles)2x miles on all purchasesApply
$450$500– $200 airline credit
– Global Entry TSA
– Airport lounge access
Apply