December 1st 2023.
Establishing a business credit report is a crucial step in increasing your business financing options, but it is not an automatic process. Business owners must take certain preliminary steps to start building and maintaining their report.
The first step is to properly establish your entity. This requires incorporating your business as a C-Corp, S-Corp, or Limited Liability Company, obtaining an Employer Identification Number, setting up a dedicated business bank account, acquiring a business phone line, creating a business website, and ensuring a clear separation between personal and business affairs. It is also important to have the right legal advice and the right levels of insurance.
The next step is to register your entity with the two major business credit bureaus, Experian Business and Dun & Bradstreet. This registration will give you a D-U-N-S number and a D&B PAYDEX Score from D&B, and an Intelliscore Plus from Experian. Both of these scores are measured using a scale of 1–100 with a score over 80 considered the best tier. Make sure to also set up a credit monitoring system to verify each month that your payment history is being reported properly.
The third step is to begin building your business credit profile. This can be tricky, as not all creditors report to business credit bureaus, so you will have to research and find those that do. Shared secured loans and secured credit cards from your local credit union are a great way to start, as they are reported to the business credit bureaus as regular loans and credit cards. You can also look to companies such as Grainger, Uline, Quill, and OnDeck.
Once you have established a solid six to twelve months of using these methods, you can now apply to a variety of business credit card companies to add additional trade lines to your report. Additionally, reach out to vendors, suppliers, and consultants for your business and inquire about trade credit, which can be reported to the bureaus.
After twelve to twenty-four months of using these strategies, you will be able to open up a variety of business lines of credit, leasing, and term loans. You will also be able to receive lower APR business credit cards and more attractive trade credit structuring. To ensure you make the most of this process, make sure all payments are made on time and in full, and even earlier than the scheduled due date.
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