Steps to the best ways build business credit

Written By Steps To Faculty Published October 14th, 2010

When starting your own business your primary sources of business credit are your own assets and personal credit. However, over time using your own credit to finance business growth can be devastating financially and also risky. If something should go wrong with your business, you are accountable and your credit score could decrease. Additionally, establishing business credit gives you more credibility and a better chance at attracting higher amounts of financing from lenders down the road. Lastly, by establishing business credit as you are starting your own business, you reduce the risk of being fully liable financially in the event there is litigation against your business. With this background, the following steps are a good way to start building business credit for your firm.

Step 1 Get a tax id #

The first step is to incorporate (LLC, S corporation, C corporation) your business to qualify for a tax identification number. Once you incorporate at incorporate.com , you will be asked to complete a form that let’s you apply and receive a federal tax identification number. This number is like a special unique identifier for your business.

Step 2 Establish credit with vendors

Once you have a tax identification number, talk to at least five of your vendors and request that they report you to the 3 credit bureaus, especially Experian. You will still have to use your personal credit at this stage since you have no solid record of payments to vendors yet. These vendors will serve as your references when you get a Dunn & Bradstreet listing and also for when you apply for a loan. Keep this in mind. But after a period of five or six months, you should be on your way.

Step 3 Pay ahead of schedule

You should maintain a habit for paying your vendors ahead of schedule. Be sure to keep a positive cash flow also and do not get behind in any payments. This will help establish your payment history and help boost your paydex score over the next few months.

Step 4 Get a loan and credit

Now that you have a track record, go to First Equity (firstequity.com) and get a no guarantee credit card. You should also get a small business loan from the Small Business Administration or any small business association. Even a credit union can help give you some financing. Obtaining business credit requires that a solid business plan be presented to lenders for their perusal. Lenders need to understand what your business is about, the course of action you intend to take to meet your firm’s mission and sales objectives and how much financing will be required to achieve this aim.

Step 5 Set up a Dunn & Bradstreet profile

Now you are ready for a Dunn & Bradstreet profile. Submit your vendor list and your payment history to Dunn & Bradstreet to qualify for a Dunn & Bradstreet rating number. This is your lifeline and will help you get even more financing down the road. Without this number, you will have a hard time being able to get anymore credit. Through Dunn & Bradstreet you can use a trade reference profile builder to boost your rating and also connect with even more vendors, who will help build your business credit.

Remember, not to slack off. Keep paying your bills ahead of schedule and maintain frequent contact with your vendors, who serve as your reference points. Please visit stepsto.com for more great business advice.


Roger Due

Investing in Your Destiny® & Coaching Program - Wealth Building Summit Dallas, Texas

My name is Roger Due and I am from Albuquerque, New Mexico and I am the owner of the Monsano software company. This has been an absolutely fantastic conference. This is the best I have ever been to.