Maintaining a strong business credit score is a long-term process. Yet when you’re first getting started, it may be possible to establish business credit quickly.
You might be able to build business credit in 30 days or less with some business credit bureaus. But you may need to open multiple business tradelines to accomplish this goal. On-time payments are also a must if you want the credit score you earn to be positive.
Below are six shortcuts that could help you make fast progress toward your business credit-building goals.
Shortcut #1: Square Away Your Business Identity
Before you can build business credit, you need to think ahead to the type of information you will need to share on commercial financing applications. It takes a little effort to make sure that your company appears legitimate in the eyes of lenders and vendors.
In addition to reassuring lenders that your business is trustworthy, setting up a separate business identity could protect you on a personal level. It’s important to keep your business and personal finances (and credit) as separate as possible.
Set Up Your Business Entity Like an LLC or S-Corp
Filing for a business entity is one of the first steps to giving your business its own identity (preferably one that’s separate from your own). You can create a legal business entity with the Secretary of State where your business is located.
Available business entity options can include:
- Limited Liability Company (LLC)
- C Corporation
- S Corporation
- Etc.
A legal business entity should make it easier to build and qualify for business credit too. However, you may want to speak with an attorney or a tax professional to find out which business entity will work best for your situation.
Keep Your Business Details Consistent
Another tip that may help you build business credit faster is to keep all of your company’s identifying details consistent. Information that you use to identify your business to lenders, suppliers, financial institutions, and others should not change, including:
- Business Name
- Address
- Phone Number
- Website
- Etc.
Whether you’re establishing a business entity, opening a business bank account, registering with a business credit agency, or applying for credit, you should use the same exact identifying information each time. Even telephone and online directory details should match.
Apply for an EIN
Once you establish a legal business entity with your state, you can (and typically should) file for an Employer Identification Number, or EIN, with the Internal Revenue Service. This number will essentially serve as your company’s Social Security number.
You can complete a free EIN application online with the IRS. Once you have a number, your business can use it to apply for financing (i.e., business loan, business credit line, etc.), open a business bank account, and even file a business tax return.
A business credit reporting agency can also use your EIN to open a business credit file for your company. And this nine-digit number may be a key component in your future financing applications.
Request a DUNS Number
Before your business can qualify for certain types of funding, you will need to establish business credit scores. One popular business credit score, the PAYDEX Score by Dun & Bradstreet (D&B), is attached to a nine-digit business identifier called a D-U-N-S® Number.
You can register for a DUNS Number online at dnb.com. There’s no charge to do so. However, D&B representatives may invite you to expedite the registration process for a fee.
Note that if you’ve already opened business tradelines in your company’s name, there’s a chance you might be registered with D&B already.
Having a DUNS number could potentially help your company to qualify for certain types of trade credit and financing in the future. You may also need this nine-digit qualifier if your business plans to apply for government contracts or grants at any point.
Find and Use the Appropriate NAICS Code
NAICS stands for the North American Classification System. A NAICS code is something that the federal government, banks, lenders, and others use to classify businesses in the United States and abroad.
It’s important to choose the correct code that fits your industry when you set up your business identity. In fact, you may need to identify the type of business you operate (via a NAICS code) when you apply for an EIN with the IRS.
Choosing the wrong NAICS code could cause problems. For example, selecting a code for a high-risk industry when you could opt for a different identifier might make it harder for your business to open merchant accounts, secure financing, and more.
Keep in mind that lenders and government agencies may review your NAICS code for inaccuracies or fraud. So, purposely (or even accidentally) choosing an incorrect code could also come back to haunt you.
You can find a list of available NAICS codes online with the United States Census Bureau. Locate the code that best describes your business activity and you should be in good shape.
Establish a Separate Business Bank Account
Setting up a separate business bank account is another critical step to complete as you work to build business credit. Note that you should file for an EIN before you apply for a new business bank account as you’ll need that number to complete your account paperwork.
Having a separate business bank account could make it easier to qualify for business financing. Yet this separation between personal and business finances can also benefit you in a number of other ways such as:
- Allowing you to set up a merchant account to accept credit and debit card payments.
- Helping you keep business and personal finances separate for tax purposes.
- Providing an easier way to manage business cash flow.
Shortcut #2: Open a Credit Strong Credit Builder Account
If you want to build business credit from scratch (and do so quickly), it’s critical to find lenders that are willing to work with your company in its present condition.
Certain lenders aren’t comfortable offering financing to a business with no established credit. But some companies that help build business credit offer financial products with the new (or new-to-credit) business in mind.
A business credit builder loan may be one of the easiest ways to add a trade reference to your business credit report. With the Credit Strong Business credit builder account, for example, your company might qualify for a new account even with no previous credit history.
When you open a business credit builder account, Credit Strong places your business loan funds in an FDIC-insured savings account. The funds serve as collateral to secure your business loan.
After you make your final payment, you’ll receive access to the funds minus any interest and fees. You can also cancel anytime, if you wish, at no cost.
You can apply for a Credit Strong Business credit builder account with your EIN. If you qualify, you’ll have the opportunity to build business credit for your company without using your personal credit information.
As you make small monthly loan payments (up to 120 months), Credit Strong will report the activity to the business credit bureaus. Pay on time or before your due date each month and you’ll have the ability to establish solid payment history and good business credit scores.
Shortcut #3: Apply for Net-30 Accounts
Net 30 accounts with vendors or suppliers can be another easy way to establish company credit for the first time. Even startups might qualify for a vendor account, depending on the company’s approval criteria.
When you open an account with net-30 terms, it allows your company to purchase products or services without paying for them right away. Instead, your business receives an invoice and will have up to 30 days to pay the bill. (Think “buy now, pay later.”)
Some vendors will report accounts with net-30 payment terms to a business credit bureau (or multiple bureaus). If you can find and open these accounts, they can empower you to start building business credit as soon as they show up on your company’s credit report.
As with business credit builder accounts, on-time payments are a must for any account that appears on your business credit report. Some business credit scoring models may reward you for making early payments as well.
Shortcut #4: Get a Business Credit Card
One of the most common credit-building tools available is a credit card. Whether you’re trying to establish credit as an individual or a company, a well-managed credit card account has the potential to get you closer to your goal.
In addition to credit-building potential, there are several other reasons you might want to consider applying for a credit card in your company’s name.
A business credit card can:
- Keep personal and business finances separate.
- Help you manage your company’s cash flow.
- Represent a more convenient way to pay.
- Allow you to earn valuable rewards or cash back on your purchases.
- Give you a chance to establish business credit without collateral.
- Feature lower interest rates compared with some other types of business financing (i.e., invoice factoring, merchant cash advance, etc.).
If you’re considering a business credit card, there are several options available– just make sure that it reports to the business credit bureaus. Below is a look at three different strategies you can use to try to open a credit card for your company.
Option 1: Leverage Good Personal Credit to Open a Traditional Small Business Credit Card
Good personal credit can open a lot of doors — both in your personal life and for your business. In the case of a business credit card, a good personal credit report and score can improve your odds of qualifying for a new account (and better offers from card issuers too).
If you’re considering this approach, it’s wise to check your three personal credit reports before you apply for a business credit card. You can visit AnnualCreditReport.com to claim a free credit report from each consumer credit bureau once every 12 months.
Pro Tip: You can check your three personal credit reports every week via this website for the time being. The consumer credit bureaus are offering free weekly credit access in response to the coronavirus pandemic.
Once you confirm that your personal credit is in good shape, you can shop around for the business credit card that’s the best fit for your company. Your first priority, of course, should be to find business credit cards that report to the commercial credit bureaus.
Next, you’ll want to focus on credit cards that you’re likely to qualify for based on your personal credit score. If a premium business rewards credit card requires excellent credit and your credit score falls into the good range instead, you should tailor your search accordingly.
Option 2: Apply for a Secured Business Credit Card
Using a business credit card to help establish business credit can be difficult if you have bad personal credit. However, a secured business credit card might still help you reach your goal of building business credit quickly.
When you open a secured credit card—business or personal—you make a deposit with the credit card issuer. The deposit protects the credit card company in case your business defaults.
In general, the size of your security deposit will be equal to the credit limit on your account.
As long as the card issuer reports the account to the business credit reporting agencies, the fact that the card is secured doesn’t really matter. If you manage it responsibly with on-time or early payments, the account can still help your company create a positive credit history.
With some card issuers, you may have a chance to convert your secured credit card to an unsecured account in the future (provided you keep the account in good standing). In other cases, a secured card might be a stepping stone to a better credit card later.
Option 3: Build Business Credit Before, Then Apply for a Business Credit Card With No Personal Guarantee
Most business credit card issuers require a personal guarantee when you open an account for your company. A personal guarantee helps credit card companies manage risk on business credit cards.
If your company defaults on a business credit card with a personal guarantor, the card issuer has another party (aka the business owner) to hold liable for the debt. Even if a company closes, a personal guarantee protects the card issuer’s financial interests.
However, some business owners prefer to avoid this type of arrangement (for understandable reasons). If poor personal credit or personal preference makes you want to avoid these types of accounts, there are other options to consider.
Some business credit card issuers that don’t require a personal guarantee include:
- Sam’s Club Business Mastercard
- Office Depot OfficeMax Business Credit Card
- Brex Corporate Card
- SVB Innovators Card
Of course, if you’re trying to open a business credit card without relying on your personal credit for approval, you’ll need to make sure you have a good business credit rating first.
Shortcut #5: Make Every Payment On Time or Early
The way you manage your business tradelines affects the type of credit score your company will earn. Late payments may lead to a low credit score that makes it harder for your business to qualify for financing rather than easier.
Some business credit scores are based entirely on your company’s payment history. Here’s a look at the popular D&B PAYDEX® Score, and what it tells others about your company.
PAYDEX Score Ranges
| PAYDEX Score | Risk Level | Meaning |
| 80-100 | Low Risk | Business pays on time or early. |
| 50-79 | Medium Risk | Business pays 15-30 days late. |
| 0-49 | High Risk | Business pays more than 30 days late. |
The highest PAYDEX Score, a score of 100, comes from consistently paying your business credit obligations 30 days before they are due. This behavior communicates to future vendors and lenders that your company is a good credit risk.
Other business credit scores, like Experian’s Intelliscore Plus, can also be influenced by your company’s bill-paying habits. However, factors like credit utilization may also impact your business credit rating.
Shortcut #6: Monitor Your Business Credit
As you can see above, good business credit doesn’t happen by accident. Even if you’re able to establish business credit quickly, doing so requires an investment of your time and money.
The last thing you want to do after expending all that energy and expense is to forget about your business credit. Instead, you should make a point to monitor your business credit to make sure your efforts don’t go to waste.
Ideally, you want to review your business credit information every month. If you monitor your business credit, it positions you to react quickly if mistakes or problems occur.
There are several ways to monitor your business credit, including:
- Credit Strong: Review your Equifax Business Delinquency Financial Score Grade every month — free of charge — as an account benefit.
- Nav: Access details from your D&B, Equifax and Experian business credit reports with a free account sign-up.
- Business Credit Reporting Agencies: You can visit each business credit agency to request copies of your commercial credit report. However, you may have to pay a fee to access your company’s credit profile information.
Bottom Line
You may need to establish more than one business tradeline on your journey to build a healthy business credit profile. And if you want to establish credit for your company fast, then you’ll need to consider opening several accounts back to back.
Some business credit bureaus (like D&B) require several trade references before your company will be eligible for a business credit score. Other commercial credit bureaus (like Experian) may issue your business a credit score with just one open credit account.
Most of all, you’ll want to follow the best practices outlined above. These smart strategies, such as timely payments and credit monitoring, may not only help your business create a good credit profile, but maintain it over time.
