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Steps to Building Business Credit in 2022

Published By Janet Gershen-Siegel at March 22nd, 2022

Steps to Building Business Credit in 2022

Welcome to Your Guide to Steps to Building Business Credit in 2022

Do you want to know how to build business credit with EIN to get the financing you need to run your business? Your business setup is key. And records consistency matters. The steps to building business credit  in 2022 are in this particular order for a good reason.

You Probably Need to Learn the Steps to Building Business Credit in 2022 if…

You’ve ever tried to get credit for your business but were turned down. Or you’ve heard of building business credit with EIN, but you don’t quite know where or how to start. Or you’re tired of bootstrapping your business and want it to start funding itself. And you’re ready to take your business to the next level.

Steps to Building Business Credit in 2022, Fundability™, and Your Business

Business credit is credit in the name of a business. It relates to the company’s ability to pay its bills, and not the owner’s personal credit history. It is also a great way to start to get your business to pull its own weight and fund itself.

Your business’s bill-paying behavior is crucial to getting business financing at good terms, and if you can get business funding at all.

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Steps to Building Business Credit in 2022 and Fundability™

Fundability is the ability of a business to get funding. A lot of this power is in your hands. You can make life easier for your business and yourself, or not. Fundability is all about paying attention to details.

Continue the Steps to Building Business Credit in 2022 by Building For Fundability

A business starts with no credit profile. As a result, what’s on an application is all that’s reviewed for approvals. So your application must be strong. For businesses where the owners have poor personal credit, what’s on the application is also key. These businesses don’t seem Fundable to lenders, so build Fundability from the start. Laying a strong and proper foundation helps your business make it.

Business Name

steps to building business credit in 2022 Credit Suite2 - Steps to Building Business Credit in 2022We start with your steps to building business credit in 2022 with your business name. This is because it leads to so many other details. Check with your Secretary of State—a business name may have to be unique. Make sure your SOS has all necessary information for your company, and that it’s up to date and correct. You want to be in good standing with them, and your entity must be active. You must file annual reports and pay a fee each year to stay active.

Keep the name of a high-risk or restricted industry out of your business name. Your business can be Juan’s rather than Juan’s Consulting. There is nothing underhanded about this—it is open and honest. It can help prevent a denial from a lender.

Records Uniformity

A common reason for loan and credit card denials is the lender can’t find a business offline or online. So make it simple for lenders and credit issuers to find your business.

This means the business name on your application must match what’s online and in your Secretary of State listing. Yes, you’re going for a perfect match. Make sure it matches corporation papers, licenses, utility statements, and bank statements. Also make sure the business name and all other information is the same on every online listing you find.

This even includes using the word ‘and’ or an ampersand (&). Pick one and stick with it! Why? Lenders and credit issuers interpret differences as fraud. Keep records of where your business name is, to be sure you catch everything. And if you ever change your business name, make sure to change it everywhere.

Business Address

Your business address must be a real brick and mortar building. That is, it has got to be deliverable physical address. This can never be a UPS box or a PO Box. Some lenders don’t approve and fund unless this criterion is met.

If you want to look like a larger business than you are, use a virtual address. This can also be a good idea to hold meetings or interviews. It’s a lot more professional than doing this on your front stoop. We like Regus, Davinci, and Alliance Virtual Offices. But at least one credit issuer doesn’t accept virtual addresses.

EIN

Get a free EIN for your business at IRS.gov. Much like you have a Social Security Number, your business has an EIN. Use your EIN to open a bank account and to build a business credit profile. Take the time to verify all agencies, banks, and trade credit vendors list your business with the same Tax ID number.

Business Entity

To get financing or credit for your business you must have a business entity. Often, a corporation or LLC business entity gives you more credibility. And corporate entities by default reduce your personal liability. Other entities (like partnerships) don’t. This is because incorporating creates a separate legal entity. You must file this with the Secretary of State for your state. Make sure your entity is set up in the same state as your business address.

Industry and Risk

An early step to Fundability is setting the industry your business is in. Some industries are riskier than others. With traditional funding sources, added risk can mean stricter underwriting guidelines or even no funding at all. Risky industries tend to be where chances of personal injury or property damage are high. Or there are a lot of cash transactions, or the revenue stream is unstable. Or there’s a low barrier to entry (so owners may not be skilled or experienced). Weapons manufacturing, gas stations, and consulting all fill the bill.

Why Risk Matters

The biggest reason why risk matters has to do with funding. Lenders may hesitate to do business with high risk businesses. So, those businesses must find other solutions for financing. These can include crowdfunding, angel investors, venture capital, building credit for business and more. Still, a lot of businesses would rather work with lenders.

NAICS Codes

Choose NAICS codes for your business at the IRS website. Federal statistical agencies use these codes to classify business establishments. This is to collect, analyze, and publish data, on the American business economy. NAICS codes also identify businesses which are high risk. The IRS, lenders, banks, insurance companies, and business CRAs use them. Note: the NAICS list of high risk industries is old and there are no plans to update it.

Of course you want to be honest when choosing your NAICS code. But if more than one can apply, you need not choose the one that’s higher risk. So it pays to check and be careful when choosing. If only high risk codes work, you can change your business, to match a related but lower risk code. There is nothing underhanded or dishonest about doing this.

Business Phone and 411 Listing

Toll-free phone numbers are best. Lenders see them as a sign of business credibility. For a single owner with a home-based business, this makes the company seem bigger. It’s easy and inexpensive to set up a virtual local phone number or a toll free 800 number. Use VoIP (voice over internet protocol) to have the number ring on any cell phone or landline.

If you don’t want customers calling your home all day, don’t use a personal cell or residential phone as a business phone number. It also helps with Fundability to have a dedicated business phone number. Your phone number must have a listing with 411 for most credit issuers and lenders to approve you. Check if your record has a listing and make sure your info is accurate. No record? Then use ListYourself.net to get a listing.

Business Licenses

Contact state, county, and city government offices. See if there are any necessary licenses and permits to operate your type of business. Licensing requirements differ, depending on state, town, and industry. Being licensed builds credibility in your business. This can help you get more customers.

Web Domain and Professional Website

Lenders and credit issuers research your corporation on the internet. It is best if they learn everything straight from your corporate website. Not having a company website can hurt your chances of getting corporate credit. It should be professional, with helpful info for anyone finding your business online.

Buy web hosting from a hosting company. Your domain should be your business name, if possible. You need a company email address for your business. This email must be on the same domain as your website. Use a professional email address like [email protected]. This is professional and helps your chances for approval from a credit issuer. Do not use Yahoo, AOL, Gmail, Hotmail, or similar kinds of email.

Business Bank Account in the Business’s Name

This is one of the more crucial steps to building business credit in 2022. You must have a bank account devoted to nothing but your business. The IRS does not want you commingling funds. Make accounting easier and reduce the risk of audit at tax time. Keep personal and business funds separate. A separate bank account makes it easy.

Being able to offer more bank account records helps you get larger business loans. It helps to increase your borrowing potential.

Business Merchant Account

Opening a business merchant account is a smart way to help your business. Now your business can accept credit and debit cards. Studies show that customers spend more if they can pay by card. This also increases your finance options. It tends to be more secure, too.

Get Set Up with Business Credit Reporting Agencies

To start really establishing business credit, go to D&B’s website and look for your business. If you can’t find it, get a free D-U-N-S number on the D&B site. A D-U-N-S number + 3 payment experiences leads to a PAYDEX score. You need a D-U-N-S number to start building business credit. Once in D&B’s system, search Experian and Equifax’s sites for your business. Now that your business is all set up, it’s time to start building business credit.

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Steps to Building Business Credit in 2022 from the Ground Up

The steps to building business credit in 2022 lead directly here. Start with vendor accounts. This is a proven way to start building business credit. Each of these steps to establish business credit, and every credit issuer can help your business. It’s meant to help you qualify for business credit cards with EIN only that you’ll want to use. This isn’t building for the sake of building or to increase a number. These credit issuers have what your business needs to succeed. Keep building–your time in business helps.

Starter Vendor Credit

Starter vendors are open to working with most businesses, even startups. Make sure vendors report to the CRAs—many do not. Vendors that report do so within 60 days. They help you build your business credit profile and score.

Terms vary depending on the vendor, but they tend to be Net 30. This means you have 30 days to pay in full. At least one doesn’t accept virtual offices. And you often need a D-U-N-S and an EIN at least. But you don’t need collateral, good personal credit, or cash flow.

Business Credit Building with Vendor Accounts

One of the best things about vendor credit is that it’s often not from a bank. As a result, 31 CFR § 1010.230 (a 2018 federal regulation) does not apply. It requires that anyone in a business with at least a 25% stake or control must provide their Social Security number on a loan application. No Social Security Number means issuers must decide on your credit application with EIN instead of SSN. For any SSN field if you’re not including your SSN, don’t put ANY other number in there. That violates two federal laws!

Add payment experiences from three vendors. Once they report to business CRAs like Dun & Bradstreet, you start qualifying for more credit. But keep in mind, any cards issued by banks fall under federal regulations.

For starter vendors, check out our starter vendor research. And for the most up to date info, confirm on the vendors’ sites.

Business Credit Cards with No Personal Guarantee

As you build exceptional business credit and pay your bills on time, credit issuers trust you more. You get higher limits and better terms, and start to get business credit cards with no PG.

Retail Credit

Retail credit comes from major retailers like Staples. Buy everything from office supplies to power tools. Retailers check if business info is uniform everywhere and if your business has proper licensing.

There can be a time in business requirement. You may need to have at least a certain number of employees. You may have to meet a minimal annual sales amount. Terms can be revolving. You need at least 3 accounts reporting to business CRAs.

Fleet Credit

Use fleet credit to buy fuel, maintain vehicles of all sorts, and repair vehicles. Even businesses which don’t have big fleets can still benefit. These are often gas credit cards.

There may be a time in business requirement. But if your business doesn’t meet it, you may be able to instead offer a PG or give a deposit to secure the credit.

Business Credit Cards

Business credit cards are more universal-type credit cards, like MasterCard. Use them almost anywhere. These cards may even have rewards programs or offer other valuable perks.

Terms can be revolving. Often you need at least 14 accounts reporting to business CRAs. There can be longer time in business requirements. You may need to have at least a certain number of employees. Qualifying for bank credit cards means you can meet most if not all the requirements for other kinds of financing.

Beyond the Steps to Building Business Credit in 2022: A Quick Look at Business Financing

Incurring debt and then paying it back on time helps you build business credit. Startups tend to not qualify for bank loans or most SBA loans. But they may qualify for loans from alternative lenders. For startup owners with good personal credit, our Credit Line Hybrid is an excellent choice. You can build business credit and finance a business at the same time.

Our Credit Line Hybrid

A credit line hybrid is a form of unsecured funding. Our credit line hybrid has an even better interest rate than a secured loan. Get some of the highest loan amounts and credit lines for businesses. Get 0% business credit cards with stated income. Many report to business CRAs—build business credit at the same time.

You need a good credit score or a guarantor with good credit for approval (FICO score of at least 680). No financials necessary. Loans go up to $150,000. Note: some cards may report on your personal credit.

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Monitor Your Business Credit at D&B, Experian, and Equifax

Yet another aspect of the steps to building business credit in 2022 is monitoring your business credit reports. Know what is going on to spot trends and put on the brakes if you must. If there are errors, you can dispute them. And you’ll stay focused on the process because business credit building never ends. But monitoring can get pricey fast.

Monitor Business Credit at D&B, Experian, and Equifax for Less

But there’s a solution! Did you know you can get business credit monitoring for all 3 of the big business CRAs, and all in one place—for less? Credit Suite offers monitoring through its Business Finance Suite (through Nav). See what credit issuers and lenders do. So you can improve your scores and get the business credit and funding you need.

Improving Your Reports

Paying off accounts on time always pays dividends, as does avoiding bankruptcies. Avoid lawsuits if possible. It’s always wise and helpful to be correcting errors as you spot them.

Use Your Business Credit History to Get Higher Credit Limits

Not every cardholder gets a credit limit increase if they ask for one. Credit issuers want to know you’ll pay them back. A good payment history assures a credit issuer that you’ll pay your debts. You’re less risky to them, so they feel they can extend more credit to you.

As you qualify for credit limit increases, you’ll get new offers for more credit. And as you continue to show how responsible you are in paying business debts, approvals will come easier. Credit issuers trust an ever-increasing business credit score.

Get the most favorable funding by paying all bills on time. This gets your business a PAYDEX score of 80. You’ll also get an Equifax Credit Risk Score of 90 or better. And you’ll get a good FICO SBSS score, driven (in part) by on-time payments and business credit history. For Experian, historical behavior (payment history) is 5—10% of the total score.

Steps to Building Business Credit in 2022: Takeaways

Business credit building is a process. Performing the steps in order saves time, money, and aggravation. Get the best scores by paying your bills on time, every time. And monitor your reports to spot errors and fix them ASAP.

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