How To Build Business Credit

Knowing how to build business credit is a critical component of developing a healthy, sustainable company. Smart business owners know that their business credit ratings are essential to the ability to obtain capital – the lifeblood of any company.

Most business owners naturally think of credit in terms of its importance in traditional bank lending. But bank financing is just one slice of the business financing pie.

The single largest category of business financing in the entire world is business-to-business credit – known also as “corporate business credit” and “trade credit” – which occurs when one company extends credit to another to purchase products or services. So, even if private business capital is plentiful and bank loans aren’t needed, building business credit is still worthwhile for any company, regardless of size.

Establishing business credit is often an afterthought, if not completely overlooked, by entrepreneurs starting a new business. Credit for business is not a well-understood topic in general, and its importance is minimized by many “experts” who, because they don't know how to build business credit either, advise owners to use their personal credit to obtain the business financing they need. In fact, personal savings, credit cards, retirement accounts and home equity together are the principal source of funding for most small- and medium-sized business operating in the U.S. today.

For most start-ups, the use of personal funds is unavoidable in the initial phases of the business. But placing your personal assets and credit score at risk is not a sound long-term business financing strategy. It is a recipe for disaster.

Why You Need To Know How To Build Business Credit

All business owners should establish business credit separate from their personal credit and work to improve their business credit ratings over time. By building business credit you:

• Protect your personal assets and credit score
• Take advantage of additional financial leverage to meet current business capital needs
• Prepare for any future lending needs
• Enjoy lower finance charges, insurance premiums and better terms from vendors
• Build credibility for your business

Ready access to credit and saving money on finance charges and leases are the obvious advantages of a good business credit profile, particularly in the long term. Capital is king in business financing, and when you build business credit, you increase the odds that you will have more of it in the future.

But the biggest advantage of having good business credit ratings is that you can substantially reduce the financial risks inherent in owning a business for yourself and your loved ones. By separating your personal credit from the business, you protect your personal credit scores and your ability to obtain credit in the future. And with proper planning, your personal wealth can be shielded from business creditors in the unfortunate event of a business failure.

How Business Credit Ratings Are Determined

There are three main repositories for business credit – Dun & Bradstreet, Experian Business and Equifax Business – and a number of smaller ones, such as Client Checker, Business Credit USA and Kroll Factuall Data.
The bureaus assign business credit ratings as numerical scores ranging from 0 to 100, with 100 representing a lowest risk (best rating) and 0 representing a very high risk (lowest rating).

As is the case with your personal credit, a business’s credit scores are based on a complex statistical model designed to predict the likelihood of default. And they are dynamic, constantly changing based on a host of factors, including:

Business
Credit Tip

If you’re looking into how to build business credit for the first time, then you should check out the credit bureaus as well.

All three of the major business credit bureaus have plenty of information on the web to help you get started.

• Number of accounts (known as “trade lines”)
• Outstanding balances of open accounts
• Payment habits
• Credit utilization
• Trends over time
• Public records (judgments, liens, bankruptcies)
• Length of credit history
• Other characteristics (company size, industry, business structure, etc.)

How To Build A Business Credit Profile

Establish Business Credit on Your Own

With time, patience and determination, you can build business credit on your own. In fact, you can get off to a good start before even opening your doors by creating a separate entity for the business (a corporation or limited liability company), which allows a clean separation of your business credit profile from your personal credit profile. To tackle the task of establishing business credit on your own, you will need a solid foundation for your company – a business plan, corporate documents and all necessary licenses and permits in hand. You must create a a viable business on paper to be trated seriously by the credit bureaus, commercial lenders, and vendors.

So, before you attempt to establish business credit profiles with the three credit bureaus, you will need to:

• Incorporate or form an LLC (Limited Liability Company) to ensure your company is seen as a separate business entity
• Obtain a federal Employer Identification Number
• Open business bank accounts in your legal business name
• Set up a dedicated business phone line in your business name and make sure it's listed

Once you have these, you can apply to each bureau for a credit profile.

Finally, you'll begin making purchases for your business using your available start-up capital. Your objective is to find vendors that will allow you to establish business credit based on your personal credit background and who agree to report your transactions to the three credit bureaus.

At this point, your Investment in a well-written business plan will pay off handsomely. When you initially begin to apply for separate business credit, a formal business plan will demonstrate your commitment to vendors and motivate them to believe strongly in your business. Once you have succeeded in obtaining credit from one vendor, your chances of opening accounts with others improve greatly. Provided you meet all of your obligations to these creditors, within 12-18 months, you should have respectable business credit rating from all three bureaus.

To continue to build and improve your business credit profile, you will follow guidelines not unlike those used for your personal credit rating:

• Pay on time
• Monitor your firm’s credit for accuracy and to ensure vendors are reporting your prompt payments
• Limit the number of credit inquiries
• Do not open excessive credit
• Keep all licenses and permits current

Hire An Expert Who Knows How To Build Business Credit

Professional help is available to business owners who want faster results than the 1-2 years it can takes to establish a business credit profile on their own.

Though it’s true that building business credit is not all that difficult, if done correctly, it is an intensive, time-consuming process that can distract you from running your company. With professional business credit services, you can build a business credit profile quickly while leaving the tedious details in the hands of experts.

A web search for “how to build business credit” or “credit for business” will yield numerous companies offering business credit services for fees as high as several thousand dollars. Be particularly cautious when you see fantastic promises, such as “instant” credit profiles or guaranteed credit scores. Since no one can possibly control the inner workings of the credit bureaus, such claims are plainly false. The procedures involved in building a business credit profile are the same for everyone – a knowledgeable professional can help you expedite the process, but nobody can bypass it.

Try to find a reputable company that offers a full-service program – one with a clearly defined, methodical approach and one that provides a business credit expert to guide you through each and every step of the process. Ask for references and call a few to assure yourself that the firm can deliver on its promises and meet your company’s requirements. Good business credit services will offer a money-back guarantee if they fail to deliver promised results.


Time is money. Hiring a reputable business credit service company that knows how to build business credit will allow you to focus your time and effort where it is needed most – building your business.