Small business credit is essential for any business that wants to grow and succeed. It can help you to secure loans, finance equipment, and get better deals from suppliers. But building small business credit can be a challenge, especially for new businesses.
This blog post will walk you through the steps of building small business credit in 2023. We'll cover everything from registering your business to getting your first business credit card.
Step 1: Register your business
The first step to building small business credit is to register your business. This will create a legal entity for your business and allow you to obtain a business credit report.
Two main types of business structures exist: sole proprietorship and limited liability company (LLC). A sole proprietorship is the simplest type of business structure, but it does not offer any personal liability protection. An LLC is a more complex business structure, but it offers limited liability protection for its owners.
Which business structure you choose will depend on your individual needs and circumstances. If you are unsure which business structure is right for you, you should consult with an attorney or accountant.
Step 2: Get a Dun & Bradstreet (D&B) number
A D&B number is a unique identifier that is assigned to your business. It is used by lenders and suppliers to assess your business's creditworthiness.
To get a D&B number, you can visit the D&B website and create a free account. Once you have created an account, you can submit a request for a D&B number.
Step 3: Open a business bank account
Once you have registered your business and obtained a D&B number, you should open a business bank account. This will separate your personal finances from your business finances and make it easier to track your business spending.
When choosing a business bank account, you should consider the following factors:
- Monthly fees
- Minimum balance requirements
- ATM access
- Online banking features
- Business credit card options
Step 4: Get a business credit card
A business credit card is a great way to start building small business credit. When you use a business credit card and make your payments on time, you are building a positive credit history.
To qualify for a business credit card, you will need to have a good personal credit score. You will also need to provide your business information, such as your business name, address, and tax ID number.
There are many different types of business credit cards available, so you should choose one that is right for your business needs. For example, if you travel frequently for business, you may want to choose a business credit card that offers rewards for travel expenses.
Step 5: Establish vendor credit
Another way to build small business credit is to establish vendor credit. Vendor credit is when a supplier allows you to purchase goods or services on credit.
To establish vendor credit, you will need to apply for a credit account with each supplier you want to work with. When you apply for a credit account, you will need to provide your business information and financial statements.
Once you have been approved for a credit account, you will be able to purchase goods or services from the supplier on credit. You will typically have 30 to 60 days to pay your invoice before you are charged interest.
Step 6: Pay your bills on time
Paying your bills on time is the most important thing you can do to build small business credit. This includes your business credit card bill, vendor bills, and any other business-related loans or debts.
When you pay your bills on time, you are demonstrating to lenders and suppliers that you are a responsible borrower. This will help you to qualify for better loan terms and interest rates in the future.
Step 7: Monitor your business credit report
It is important to monitor your business credit report regularly. This will help you identify any errors or inaccuracies on your report that could damage your credit score.
You can get a free copy of your business credit report from each of the three major credit bureaus: Experian, Equifax, and TransUnion. You can request your business credit reports online or by phone.
If you find any errors or inaccuracies on your business credit report, you should dispute them with the credit bureau. You can dispute errors or inaccuracies online, by phone, or by mail.
When you apply for a credit account, you will need to provide your business information and financial statements. Be sure to explain your credit situation to the supplier and let them know that you are committed to making your payments on time.
Building small business credit takes time and effort, but it is essential for any business that wants to grow and succeed. By following the tips above, you can start building small business credit today.
- Get involved in your community. There are a number of ways to get involved in your community, such as sponsoring local events or volunteering your time to a local charity. Getting involved in your community can help you to build relationships with other businesses and community members. This can lead to opportunities to establish vendor credit and get referrals from other businesses.
- Build relationships with lenders. Get to know the loan officers at your local bank or credit union. This will help you to better understand the lending process and make it easier to qualify for a loan when you need one.
- Be patient. Building small business credit takes time. Don't get discouraged if you don't see results immediately. Just keep making your payments on time and building relationships with lenders and suppliers. Eventually, you will see your credit score improve and you will be able to qualify for better loan terms and interest rates.
A personal credit coach can help you build your small business credit in a number of ways. A credit coach can help you understand your personal and business credit reports and scores. They can also identify any areas where you need to improve.
Once they understand your credit situation, a credit coach can develop a personalized plan to help you build your small business credit. This plan may include steps such as paying off debt, getting a business credit card, and establishing vendor credit.
A credit coach can provide you with guidance and support throughout the credit building process. They can answer your questions, help you stay on track with your plan, and motivate you to keep moving forward.
