How To Get Business Credit | To Qualify for Business Financing, Take Out Loans and Give Your Company a Boost

Every business needs a little financial assistance from time to time to grow and to enjoy continued success. Whether this means loans or low insurance rates, it helps to have excellent business credit: the measure of how creditworthy or trustworthy your business is in the eyes of lenders everywhere.

However, while getting great business credit is a worthwhile pursuit, it can be tricky if you don’t know where to start. Furthermore, building business credit isn’t exactly the same thing as building personal credit, so don’t assume that you know what to do just because you have a great personal credit score (see 'How Does Personal Credit Affect Business?').

We put together this guide about establishing and building business credit fast for any company looking to secure excellent loans (see SBA loan rates here), and low insurance costs. Let’s get started.

What is Business Credit, Anyway?

Just like people have individual credit scores, businesses also have credit that serves as a rough measure for how creditworthy or financially trustworthy an organization is. In fact, business credit scores are calculated by two out of the three major personal credit bureaus: Experian and Equifax. However, a third business credit bureau called Dun & Bradstreet takes the place of TransUnion.

Just like with regular credit, business credit can be increased by:

Key from words credit score
  • Financial responsibility

  • Paying business bills on time

  • Doing other things that show that a business (or its owner) is financially trustworthy

On the flip side, business credit can be lowered if:

  • A business doesn’t pay loans or bills on time

  • The business or owner performs risky financial activities

Why Build Business Credit?

The more business credit a business has, the easier it’ll be able to qualify for business financing, take out loans (see business grants for women), and so on. It’s always a great thing to have a higher business credit score. Plus, a business’s credit score can also affect things like insurance rates and similar ongoing costs.

Basically, higher business credit makes doing business easier and more affordable. Thus, it’s in any business owner’s best interest to grow their business credit over time through smart strategies and responsible financial practices.

How to build a good credit score cubes

How to Establish and Build Business Credit Fast

The good news is that it’s easy to establish business credit if your business is still relatively new or young. Once you’ve got the ball rolling, you can also rely on a few key strategies to build business credit fast and start benefiting from the perks and trust that a high business credit score provides.

Let’s break down these great tactics and strategies one by one.

Choose the Right Business Structure

Business Structure

You might consider making your business a distinct legal entity if you haven't already. This involves making your business a corporation or another version of the company, like an LLC or LLP. Sole proprietorships don't count as separate business entities.

By registering your business as a more advanced type of company, your business will gain more trustworthiness and “respect” right off the bat. This occurs since, by separating your business from your personal finances, you indicate a certain level of fiscal responsibility and it becomes less of a risk for lenders to provide you with funds than otherwise.

Get an EIN

The IRS Employer Identification Number or EIN is a nine-digit number that is assigned to your company whenever you have one or more employees or when you become an LLC. This number is important both for organization and for filing things like company tax returns or opening a business bank account.

Again, this is another level of legitimacy that adds to your business’s credit trustworthiness and financial stability. Get this ASAP if you want a quick boost to your business credit for a minimum of effort. Plus, chances are you may need one of these numbers in the future if your business grows beyond a single-person operation.

EIN green

Open a Business Bank Account

A business bank account is a separate bank account from your personal finances that serves your company exclusively. Alongside making your company a distinct legal entity, this also separates your company from your personal finances and can seriously boost your business credit score in the process.

Furthermore, business bank accounts open up your company to greater financial potential. For example, certain lenders won’t give you any money unless you have a business bank account to put on the application.

Lenders also look over your business bank account when reviewing options for funding or deciding whether or not to give you a loan (see best accounting tools for small business). Simply put, get a business bank account ASAP and boost your business credit score in the process. 

Woman opening a bank account on her laptop

Apply for Net Terms with Vendors and Suppliers

After the early boosts mentioned above, you can continue to build business credit by applying for net terms with certain vendors and suppliers. If you produce or sell anything, you’ll likely need to work with vendors and suppliers to get manufacturing goods or to sell your stuff.

Suppliers

As you handle these transactions (which involves buying supplies, materials, and other types of inventory) on credit, all of those purchases and payments - see best payroll software - will eventually get reported to the three above-mentioned business credit reporting agencies.

All of this creates a pattern of stable activity for your company’s credit profile. Just like it’s advantageous to make minor purchases on your credit card for business and immediately pay them back, it can also be helpful to pay for business expenses with credit and pay back the balance ASAP.

Just be sure to select only suppliers or vendors that do report to a business credit reporting agency. The more relationships you have with these suppliers, the faster your credit score will rise (provided you do make the requisite payments).

Spread Your Business’s Address and Contact Info Everywhere

It can also help to make your business easy to find, both in terms of its physical address and its phone number. To do this, make sure that you spread your physical address everywhere you can and attach your phone number to any contact information box you can find online.

Your business website should have this information, but you can also register with Google, Yelp, and other online organizations to make your business super easy for people to find. On a certain level, this provides credibility to your business and can boost your business credit to some extent.

But it also makes lenders and other credit organizations’ jobs easier when they try to locate your business and review everything about it when determining whether or not they’ll give you a loan (see EIDL and PPP review), or a low payment rate for your insurance.

A map on a computer


Always Pay Bills On Time

This last tip is pretty common sense, but it bears repeating: pay all your bills on time. Just like one of the best ways to build personal credit over time is to pay credit and other bills regularly and in a timely manner, the same is true when it comes to your business expenses.

For instance, if you take out multiple loans and have several monthly payments in order to pay for your business’s structure or repeat costs, you should make these payments on time no matter what. Furthermore, be sure to make the payments in the minimum recommended amount so that your interest doesn’t get out of hand.

You can go a little further and bolster your credit score even more by paying more than the minimum amount and clearing lines of credit periodically. Like we mentioned above, it could be a good strategy to do this with your suppliers and vendors, as you can easily take out lines of credit for a month or so, then pay off the amount when the bill comes due.

Either way, just be sure never to miss a payment or get into the habit of paying less than the minimum recommended amount. This can quickly tank your business credit score and make it much harder to get future loans or get prime insurance deals.

A man writing on a notebook on a laptop and typing on a calculator

Summary

Ultimately, establishing and building business credit requires a little financial common sense and some good planning on your part. But the rewards are more than worth the effort since a high business credit score can make it a lot easier for you to expand, get loans during times of financial strife, and enjoy lower than average insurance payments for things like worker’s compensation and other necessary coverages.

We’d heavily recommend looking into bolstering your business’s credit score wherever possible. Be sure to contact us if you want more information about small business loans or additional advice about how to make your business’s financial situation a little more successful. On another note, if you need a valuable advice to help your budiness grow, these are the business podcasts worth listening to.

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