“How to Build Business Credit” — 7 Expert Recommendations to Build Credit Fast

How to Build Business Credit

credit card advice

John Rampton
By: John Rampton
Posted: February 21, 2017
Opinions expressed here are ours alone, and are not provided, endorsed, or approved by any issuer. Site may be compensated through the issuer affiliate programs.

My business means just about everything to me. It’s what gets my blood pumping and has me jumping out of bed in the morning. It’s my passion and has been from the moment the idea for it popped into my head. Generally speaking, as with all good ideas — if you decide to do something with your idea — it will require some financial backing to get it off the ground.

I quickly realized when starting out that it really was true; you had to spend money to make money, but the challenge was finding that money to spend. That’s where I sought the help of any financial institution that would extend me business credit. While it was not always easy to get, I was determined to get access to additional capital to create and grow my business, and that’s exactly what I did.

Looking back, I realize that building business credit was challenging, but it’s well worth the effort. Now my business has grown by leaps and bounds. Whether you are a new business or an existing one, it helps to have access to business credit to assist you when you have gaps in capital, or to cover a planned expansion. You may even need capital to provide additional money when cash flow has slowed or if your cash flow is seasonal.

Here are seven ways I’ve found that have helped me to grow the creditworthiness of my business.

1. Fix Any Issues with Your Personal Credit Report

Before providing your business with any credit, a financial institution starts with your personal credit history to determine your behavior related to making payments promptly and in using credit responsibly. If you know your personal credit history doesn’t deliver a good credit score, then you will need to fix this before trying to establish credit for your business.

Get a copy of your personal credit report and look for any issues or problems that you can get taken care of. While it may take a little time to write to these companies and get mistakes corrected as well as raise your score, it’s one of the most important actions you can take to build business credit.

2. Set Up a Legal Entity for Your Business

It is critical for you to set up a legal entity for your business and to separate your personal life as much as possible from your business. You can accomplish this by simply incorporating your company. Rather than use a sole proprietorship structure, which keeps your personal finances connected to the business finances, opt for a corporate structure like a C corp, S corp, or LLC (Limited Liability Company).

Financial institutions are much more likely to provide credit to an entity that has a stringent legal and tax structure. When you have this legal entity in place, you will need to get an Employer Identification Number (EIN) for your business. This provides a way to further separate you and your Social Security Number (SSN) from your company.

The Small Business Administration (SBA) and Internal Revenue Service (IRS) provide great resources to help you accomplish this task, and the information is online.

3. Have Business Checking and Savings Accounts

With both a checking and savings account for your business, you will not only be able to show a history of cash flow, revenue, and payments, but you will also show a creditor that you are responsible and legitimate regarding a fully operational firm.

It will be important to show a creditor your daily average balance so they can see how much revenue and cash flow are available as a personal guarantee of repayment of any debt they allow you to create. While you will need a business reference to do this, you can ask a mentor or colleague with another company to help you figure this process out.

4. Open a Business Line of Credit

Opening a business line of credit provides a way to show creditors that you can be responsible for borrowing small amounts of money and then paying it back in a timely fashion.

There are many types of business credit lines to choose from, so it is a good idea to do your research and shop around for the credit line that best fits your business situation and credit standing.

  • Earning unlimited 2% cash back could mean thousands of dollars each year going back into your business
  • Plus, a one-time $500 cash bonus once you spend $4,500 on purchases within 3 months of approval
  • Use Spark Cash across all your business spend, with no categories to limit your purchasing
  • $0 intro annual fee for the first year; $59 after that
  • Rewards don't expire, and you can redeem your cash back for any amount, anytime
  • Get employee cards at no additional cost, and earn rewards from their business spend
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
N/A
17.49% (Variable)
$0 intro for first year; $59 after that
Excellent, Good Credit

BUSINESS CARD RATING

★★★★★
4.8

OVERALL RATING

4.8/5.0
  • Earning unlimited 1.5% cash back could mean thousands of dollars each year going back into your business
  • Plus, a one-time $200 cash bonus once you spend $3,000 on purchases within 3 months of approval
  • Save on interest with 0% intro APR on purchases for 9 months; 13.49%-21.49% variable APR after that
  • No annual fee
  • Use Spark Cash Select across all your business spend, with no categories to limit your purchasing
  • Rewards don't expire, and you can redeem your cash back for any amount, anytime
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
0% for 9 months
N/A
13.49% - 21.49% (Variable)
$0
Excellent, Good Credit

BUSINESS CARD RATING

★★★★★
4.8

OVERALL RATING

4.8/5.0
  • Earn 1.5 miles per $1 on every purchase, every day
  • Plus, a one-time bonus of 20,000 miles once you spend $3,000 on purchases within 3 months of approval
  • Miles don't expire, and there are no categories to limit where or what you buy
  • Save on interest with 0% intro APR on purchases for 9 months; 13.49%-21.49% variable APR after that
  • Pay no annual fee or foreign transaction fees
  • Get online Quarterly and Year-End Summaries
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
0% for 9 months
N/A
13.49% - 21.49% (Variable)
$0
Excellent, Good Credit

BUSINESS CARD RATING

★★★★★
4.7

OVERALL RATING

4.7/5.0
  • Earn 2 miles per $1 on every purchase, every day
  • Plus, a one-time bonus of 50,000 miles once you spend $4,500 on purchases within 3 months of approval
  • Miles don't expire, and there are no categories to limit where or what you buy
  • $0 intro annual fee for the first year; $59 after that
  • There's no limit to the amount of miles you can earn and miles don't expire
  • Redeem miles for travel, cash back, gift cards and more
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
N/A
17.49% (Variable)
$0 intro for first year; $59 after that
Excellent, Good Credit

BUSINESS CARD RATING

★★★★★
4.5

OVERALL RATING

4.5/5.0
  • Enjoy no annual fee
  • Earn 1% cash back on every purchase, every day
  • Build business credit with responsible use
  • Fraud coverage if your card is ever lost or stolen
  • No foreign transaction fees
  • Enjoy business benefits including Year-End Summaries, employee cards at no extra cost and experienced small business customer service
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
N/A
23.49% (Variable)
$0
Average, Fair, Limited Credit

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A line of credit gives you a certain amount of capital that you can tap into, pay off, and then continue to use as long as you keep paying back what you borrowed. This action provides a good way to establish a relatively quick history of responsible payments.

5. Leverage Other Types of Commercial Accounts

Also helpful is opening certain kinds of commercial accounts for your business for various things like a phone, a shipping company, a hosting or internet provider, bottled water, and utility company.

You can share a history of payments to these commercial accounts, which in turn, illustrates your level of fiscal responsibility. Open all types of vendor accounts for which you regularly keep the payments current, and that you may use for your business. This will bolster a system of establishing your credibility for credit.

6. Get a Dun & Bradstreet Number

Dun & Bradstreet is the source for business credit information, so it makes sense to get a number so they can provide a credit profile on your company.

The Dun & Bradstreet business credit bureau profile — and their rating — can provide much-needed credibility with financial institutions that respect this organization’s findings. You will need to first have your business entity in place along with your EIN.

7. Find Banks Using New Analytics for Lending Parameters

Today’s small businesses are in luck, thanks to new technology. Various financial institutions are putting analytics to work to gauge creditworthiness of newer companies that may have no established business credit.

According to one article on lending parameters, “Data and risk analytics company LexisNexis Risk Solutions is helping bridge the information gap between banks and businesses by offering alternative-data-based credit risk assessments for lenders to make smarter, safer lending decisions.

“By using advanced analysis techniques, LexisNexis Risk Solutions can identify — and resolve — thousands of data footprints to establish a business’s profile, limiting the lender’s reliance on traditional commercial credit reporting and increasing their ability to lend to more small businesses.”

It’s an exciting prospect to think that technology has now provided a way for more small businesses to be considered for credit.

Nurture Your Relationships with Those in the Credit Industry

All of these recommendations are intended to help you grow your credit, creating a sound basis of responsible credit usage and timely repayment.

Some of this advice can take time to establish for yourself. Start thinking about building your business credit. This habit starts with keeping all of your credit scores high — long before you need to use credit.

Be patient, thoughtful, and strategic in your approach with business credit. Nurture your relationships with those in the credit industry so they know you — and they know they can trust you. It will most likely be these people who will provide you with the necessary financial assistance for years to come.