Building Business Credit

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Building Business Credit Over Time

Many business owners are unaware of the importance of business credit. Most business owners believe it is the same as personal credit, but, there are numerous differences. The primary distinction is in how you create company credit.

Building Business Vs. Personal Credit

Over time, all credit accumulates. Personal credit, on the other hand, grows passively. If you have any form of personal debt or credit account, you have a personal credit score, whether it is good or bad. Almost all consumer credit accounts report your payments, or lack thereof, to credit reporting agencies. Business credit is not the same as personal credit. To begin with, you do not automatically have a company credit profile to which payments can be recorded. Payments are not reported on all company credit accounts. Only approximately 7% of business credit accounts disclose payments to business credit reporting bureaus. Of course, if you do not make payments, many of them will report you, but this does not help you create great company credit.

Use Business Credit to Fund Your Business

You can use one of these alternatives to obtain the funds you require right away. However, you must also create a business credit profile for your company. This will eventually allow you to obtain money for your firm without having to provide personal credit information. A well-run business has significantly more funding possibilities. You can buy yourself time to work on creating solid business credit if you use these sorts of capital to get things started. You can apply for funding under your company’s name if you have good business credit. Even if the lender checks personal credit, a strong business credit score may persuade them to accept money.

Business Credit

How to Establish Business Credit

You must not only build your company credit, but you must also ensure that you have accounts that will report to that profile. This means that establishing business credit will take significantly more effort. It must be created deliberately and gradually, by following certain stages in the correct order.

Step 1
Establish a Business Credit Profile

You cannot develop company credit unless you have a credit profile to which accounts can report. You must set up your firm in a precise way for this to happen. You want lenders to see your company as genuine and fundable. Begin by selecting a name that does not suggest a high-risk enterprise. For example, the cannabis sector is rapidly expanding, but many lenders view it as high-risk. Making your company’s name more generic to avoid the perception of danger is not illegal but also encouraged.

Contact Information

Next, you must verify that your company has its own contact information. The business address should be a physical address where mail may be received, rather than a PO Box or UPS address. A 411 listing for your business phone number is also required. You will also require a professional email address that is linked to your website; do not use a free email service such as Yahoo or Gmail.


You can now apply for an EIN using your company name and phone number. This is a unique identifier for your company, like your personal SSN. This number, rather than your Social Security number, will be used to link your business credit profile to your business. You can then open a new, dedicated business bank account using your EIN and business contact details.

DUNS number

Then you must apply for a DUNS number. This is a unique number assigned by Dun & Bradstreet, one of the largest and most widely used company credit reporting bureaus (CRAs). You will not be able to establish a business credit profile with them until you have this number; it is available for free on their website.

Step 2: Get Initial Accounts Reporting

This is when the corporate credit-building process truly begins, and it will undoubtedly take some time. You do not yet have a business credit score, so you have bad personal credit. You need accounts that will both grant credit to your company without requiring a credit check and record your payments to the business CRAs. There are a few vendors who will do this, but they are hard to come by. However, new vendors make it difficult to identify whether or not they disclose payments. Grainger and Uline are two well-known beginning vendors for reporting to business CRAs.

Step 3 Apply for Tier 2 Accounts

Tier 2 accounts typically have lower balances and higher interest rates. Many of them are confined to specific stores, such as Office Depot. If you have enough business credit history from startup vendors and manage them appropriately, you should have no trouble obtaining Tier 2 accounts approved.

Step 4 Apply for Tier 3 Accounts

You can apply for Tier 3 accounts once you have enough Tier 1 and 2 accounts reporting. These are a little more difficult to obtain, but they may have larger limits and lower rates. Fleet cards are frequently found in this tier, though there are fleet cards in other tiers as well. When you have enough of these accounts showing a favorable payment history, you can advance to Tier 4 accounts.

Step 5 Apply for Tier 4 Accounts

Tier 4 accounts are considered top tier because they are the most difficult to obtain. They usually have the greatest limits, the lowest rates, and the finest prizes. If you have worked your way up from the bottom rung and have built up your business credit to this stage, you should have no trouble having these accounts approved.

Common Questions Surrounding Business Credit

Numerous myths circulate when it comes to establishing company credit. How do you determine which vendors work as initial vendors when you have enough accounts reporting to go on, and which cards belong to which tiers? The answers to these questions are more essential than you would think.

What’s at Stake?

You’re probably wondering what you’re risking if you apply for the wrong cards at the wrong time. You could simply apply for accounts until you are authorized and then apply for any that you are not approved for later. This, however, is a bad plan since you are squandering time, and time is money. You must grow business credit over time, but it should not take longer than required. The sooner you establish your company credit profile with a solid credit score, the sooner you will be able to obtain more of the cash you require to run your business smoothly. Next, you’re causing unnecessary annoyance. Constant denials can be stressful for a business owner. It can make you second guess your choices and take your physical and mental energy.

What’s the Solution?

Every business owner requires assistance in identifying which vendor accounts to apply for, when to apply for accounts in the next tier, and which accounts fall into which tier. Creditors do not often categorize themselves in these ways. You require assistance in locating the appropriate accounts at the appropriate time. You’ll need a mechanism to track your company’s credit reports so you can know which accounts are reporting and how many are reporting at any given time. You also require assistance in locating additional funding solutions that may be suitable for your firm.