Published By Janet Gershen-Siegel at February 19th, 2018
Do you know how to build business credit fast? We break down just what you need to know and show you what will work. Awesome!
Building business credit means that your small business obtains chances you never knew you would. You can get brand new equipment, bid on real estate, and deal with the company payroll. And you can do so even when times are a bit lean.
This is specifically helpful in seasonal companies, where you can go for several months with just low sales.
Given this, you ought to focus on growing your company credit. Improve and maintain your scores and you will have these opportunities. Do not, and either you do not get these business opportunities, or they will cost you a lot more.
And no business owner wants that. You should recognize what affects your small business credit before you can make it better.
This is in a nutshell the length of time your company has using business credit. Needless to say newer small businesses will have short credit histories. Though there is not so much you can particularly do about that, do not stress.
Credit reporting bureaus will also scrutinize your personal credit score and your history of payments. If your individual credit is good, and especially if you have a reasonably extensive credit history, then your personal credit can come to the rescue of your company.
That is, you did not just get your first credit card a short time ago.
Naturally the opposite is also true. If your private credit history is bad, then it will have a bearing on your Experian business credit score in particular.
Late repayments will impact your company credit score for a good seven years. Make sure to pay your small business (and personal) financial obligations off, as fast as possible and as completely as possible. Do so and you can make a very real difference when it relates to your credit scores.
See to it to pay without delay and you will enjoy the rewards of punctuality.
A bad business year could wind up on your personal credit score. And just in case your small business has not been in existence for too long, it will directly affect your business credit. Fortunately, you can unlink them both by taking measures to do just that.
For example, get credit cards solely for your small business. Or open up business checking accounts and other bank accounts (and even get a business loan). Then the credit reporting agencies will start to address your personal and company credit on an individual basis.
Also, make certain to incorporate. Or at least file a DBA (doing business as) status. You can also pay for your company’s bills with your small business credit card or checking account. And ensure it is the company’s full name on the bill and not yours.
Just like every entity out there, credit reporting agencies like Equifax and Experian are only as good as their information. If your firm’s name is like another’s, or your name is a lot like another business owner’s, there can potentially be some errors.
So check those reports, and your business report at Dun & Bradstreet, PAYDEX. Remain on top of these reports and dispute charges with records and clear-cut communications. Do not just let them stay incorrect! You can fix this!
And while you’re at, it you should also be monitoring the credit reporting agency which just handles individual and not company credit, TransUnion. If you do not know how to pull a credit report, do not stress. It’s simple.
Business credit is credit in a small business’s name. It doesn’t tie to a business owner’s consumer credit, not even if the owner is a sole proprietor and the sole employee of the small business.
As a result, a business owner’s business and personal credit scores can be very different.
Considering that business credit is separate from personal, it helps to safeguard an entrepreneur’s personal assets, in case of a lawsuit or business insolvency.
Also, with two distinct credit scores, a business owner can get two different cards from the same vendor. This effectively doubles purchasing power.
Another advantage is that even startup companies can do this. Going to a bank for a business loan can be a formula for frustration. But building small business credit, when done the right way, is a plan for success.
Individual credit scores rely on payments but also various other considerations like credit utilization percentages.
But for business credit, the scores truly only hinge on whether a company pays its invoices promptly.
Growing business credit is a process, and it does not occur automatically. A business will need to actively work to establish small business credit.
Nonetheless, it can be done easily and quickly, and it is much swifter than establishing individual credit scores.
Merchants are a big component of this process.
Performing the steps out of order will cause repetitive rejections. Nobody can start at the top with company credit.
A business must be reliable to lending institutions and vendors.
That’s why a company will need a professional-looking website and e-mail address. And it needs to have website hosting bought from a company like GoDaddy.
Additionally company phone numbers should have a listing on ListYourself.net.
Likewise the business telephone number should be toll-free (800 exchange or comparable).
A small business will also need a bank account devoted solely to it, and it has to have all of the licenses essential for operating.
These licenses all must be in the perfect, appropriate name of the business. And they must have the same small business address and telephone numbers.
So bear in mind that this means not just state licenses, but possibly also city licenses.
Visit the Internal Revenue Service web site and get an EIN for the business. They’re totally free. Select a business entity like corporation, LLC, etc.
A small business can get started as a sole proprietor. But they will should switch to a kind of corporation or partnership.
This is in order to diminish risk. And it will optimize tax benefits.
A business entity will matter when it comes to tax obligations and liability in case of litigation. A sole proprietorship means the entrepreneur is it when it comes to liability and tax obligations. No one else is responsible.
And if you decide to get a DBA, don’t look at a DBA filing as being anything more than a steppingstone to incorporating.
Start at the D&B web site and get a free D-U-N-S number. A D-U-N-S number is how D&B gets a business in their system, to generate a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.
Once in D&B’s system, search Equifax and Experian’s web sites for the company. You can do this at www.creditsuite.com/reports. If there is a record with them, check it for accuracy and completeness. If there are no records with them, go to the next step in the process.
This way, Experian and Equifax will have something to report on.
First you need to establish trade lines that report. This is also called vendor credit. Then you’ll have an established credit profile, and you’ll get a business credit score.
And with an established business credit profile and score you can start getting more credit.
These sorts of accounts tend to be for the things bought all the time, like shipping boxes, outdoor work wear, and office furniture.
But first of all, what is trade credit? These trade lines are credit issuers who will give you starter credit when you have none now. Terms are usually Net 30, versus revolving.
Therefore, if you get approval for $1,000 in vendor credit and use all of it, you will need to pay that money back in a set term, such as within 30 days on a Net 30 account.
Net 30 accounts must be paid in full within 30 days. 60 accounts have to be paid completely within 60 days. Unlike with revolving accounts, you have a set time when you must pay back what you borrowed or the credit you used.
To kick off your business credit profile the right way, you should get approval for vendor accounts that report to the business credit reporting bureaus. When that’s done, you can then use the credit.
Then pay back what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.
Not every vendor can help like true starter credit can. These are merchants that will grant an approval with minimal effort. You also want them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.
You want 3 of these to move onto the next step.
Uline Shipping Supplies is a true starter vendor. You can find them online at www.uline.com. They offer shipping, packing, and industrial supplies, and they report to D&B and Experian.
You need to have a D-U-N-S number. They will request 2 references and a bank reference. The initial few orders might have to be paid in advance to initially get approval for Net 30 terms.
Check out starter vendor Marathon. Marathon Petroleum Company provides transportation fuels, asphalt, and specialty products throughout the United States. Their comprehensive product line supports commercial, industrial, and retail operations. This card reports to Dun & Bradstreet, Experian, and Equifax. Before applying for multiple accounts with WEX Fleet cards, make sure to have enough time in between applying so they don’t red-flag your account for fraud.
Your SSN is required for informational purposes. If concerned they will pull your personal credit talk to their credit department before applying. You can give a $500 deposit instead of using a personal guarantee, if in business less than a year. Apply online. Terms are Net 15. Get it here: www.marathonbrand.com.
Grainger Industrial Supply is likewise a true starter vendor. Find them online at www.grainger.com. They sell safety equipment, plumbing supplies, and more, and they report to D&B. You will need to have a business license, EIN, and a D-U-N-S number.
For less than a $1000 credit limit they will approve nearly any person with a business license.
Non-Reporting Trade Accounts can also be helpful. While you do want trade accounts to report to at least one of the CRAs, a trade account which does not report can nevertheless be of some value.
You can always ask non-reporting accounts for trade references. And credit accounts of any sort ought to help you to better even out business expenses, thus making budgeting simpler. These are companies like PayPal Credit, T-Mobile, and Best Buy.
Know what is happening with your credit. Make certain it is being reported and deal with any inaccuracies as soon as possible. Get in the habit of taking a look at credit reports. Dig into the particulars, not just the scores.
We can help you monitor business credit at Experian, Equifax, and D&B for 90% less.
Update the details if there are inaccuracies or the details is incomplete. At D&B, you can do this at: https://www.dnb.com/duns-number.html. For
Experian, go here: www.experian.com/small-business/business-credit-information. And for Equifax, use: www.equifax.com/business/small-business.
So, what’s all this monitoring for? It’s to challenge any inaccuracies in your records. Mistakes in your credit report(s) can be taken care of. But the CRAs generally want you to dispute in a particular way.
Get your business’s PAYDEX report at: www.dnb.com/about-us/our-data.html. Get your company’s Experian report at: www.businesscreditfacts.com/pdp.aspx?pg=SearchForm. And get your Equifax business credit report at: www.equifax.com/business/credit-information.
Disputing credit report inaccuracies commonly means you precisely itemize any charges you dispute.
Dispute your or your business’s Equifax report by following the instructions here: www.equifax.com/small-business-faqs/#Dispute-FAQs.
You can dispute errors on your or your business’s Experian report by following the directions here: www.experian.com/small-business/business-credit-information.
And D&B’s PAYDEX Customer Service telephone number is here: www.dandb.com/glossary/paydex.
Always use credit smartly! Never borrow more than what you can pay off. Track balances and deadlines for repayments. Paying off promptly and fully will do more to increase business credit scores than just about anything else.
Building company credit pays. Great business credit scores help a company get loans. Your lender knows the small business can pay its debts. They understand the business is authentic.
The small business’s EIN links to high scores and lenders won’t feel the need to demand a personal guarantee.
Business credit is an asset which can help your business for many years to come.
Once you learn what influences your company credit scores, you are that much closer to building enhanced business credit. Learn more here and get started toward building business credit.