How to Establish and Build Business Credit in 9 Easy Steps

Written by Pierre

Businessman climbing the steps to success

Ok, so you formed your LLC and you are probably ready to start making money. Now, you are also realizing how much it’s going to cost to start the money flowing. Yes, it’s almost never free. But it is possible to have credit lines that make it possible for you to never spend a dime of your own money in the process. In this article, we’ll walk you through a step-by-step guide on setting up a business credit profile, obtaining a DUNS number, and establishing trade lines with vendors to build a solid credit history. Let’s get started!

Step 1: Set Up Your Business as a Separate Legal Entity

Before you can establish business credit, it’s crucial to set up your business as a separate legal entity. This means registering your business as a corporation, limited liability company (LLC), or other legal structure. Doing so will help separate your personal finances from your business and protect your personal assets in case of legal or financial troubles.

Step 2: Obtain an Employer Identification Number (EIN)

An Employer Identification Number (EIN) is like a Social Security number for your business. It’s a unique identifier used by the IRS for tax purposes. To get an EIN, visit the IRS website and complete the online application. It’s free and easy, and you’ll receive your EIN immediately upon completion.

Step 3: Open a Business Bank Account

Opening a business bank account is essential for separating your personal and business finances. Not only does it make bookkeeping and tax preparation easier, but it also demonstrates financial responsibility to potential creditors. Be sure to use your EIN when opening the account, and consistently use the account for all business-related transactions.

Step 4: Obtain a DUNS Number

A DUNS (Data Universal Numbering System) number is a unique, nine-digit identifier for your business, issued by Dun & Bradstreet (D&B). To establish a business credit profile, you’ll need a DUNS number. You can obtain one for free by visiting the D&B website and completing the application.

Step 5: Establish Trade Lines with Vendors and Suppliers

Trade lines are credit accounts with vendors and suppliers that report your payment history to business credit bureaus. To build your business credit profile, establish trade lines with at least three vendors or suppliers that report to the major credit bureaus (Dun & Bradstreet, Experian, and Equifax). Pay your bills on time or early to establish a positive payment history.

Step 6: Apply for a Business Credit Card

A business credit card is an excellent tool for building business credit and managing expenses. Choose a card that reports your payment history to the major business credit bureaus. Be sure to use the card responsibly, maintaining a low credit utilization rate and making payments on time.

Step 7: Monitor Your Business Credit Reports

Regularly monitor your business credit reports to ensure the information is accurate and up-to-date. You can access your reports from Dun & Bradstreet, Experian, and Equifax. Dispute any errors or inaccuracies immediately, as they can negatively impact your credit scores.

Step 8: Keep Your Business Information Consistent

Make sure your business information, such as your company’s name, address, and phone number, is consistent across all credit bureaus, financial institutions, and online directories. Inconsistent information can create confusion and negatively affect your credit scores.

Step 9: Maintain Good Financial Habits

Building strong business credit takes time and discipline. Maintain good financial habits by paying your bills on time or early, keeping your credit utilization low, and avoiding excessive debt. These practices will contribute to a positive credit history and higher credit scores over time.

Wrapping Up

Establishing and building business credit is an essential part of growing your company and securing its financial future.

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