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Tuesday, March 19, 2024

How to Build Business Credit: 7 Expert Tips to Build Credit Fast (March 2024)

How To Build Business Credit
John Rampton

Written by: John Rampton

John Rampton
John Rampton

Edited by: Lillian Guevara-Castro

Lillian Guevara-Castro
Lillian Guevara-Castro

Lillian Guevara-Castro brings more than 30 years of editing and journalism experience to the CardRates team. She has written and edited for major news organizations, including The Atlanta Journal-Constitution and the New York Times, and she previously served as an adjunct journalism instructor at the University of Florida. Today, Lillian edits all CardRates content for clarity, accuracy, and reader engagement.

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Advertiser Disclosure

My business is my passion and has been from the moment the idea for it popped into my head. Generally speaking, before a good idea can be implemented, it will require some financial backing to get it off the ground.

I quickly realized when starting out that you really do have 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. Keep reading for some important steps I learned about how to build business credit. We’ll dive into the different steps you will need to take, including fixing any issues with your personal credit, setting up your business as a legal entity, and establishing checking and savings accounts for your business.

Initial Steps | Business Line of Credit

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. In many ways, it’s the foundation upon which your business will be built.

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.

BUSINESS CARD RATING

★★★★★
4.7

OVERALL RATING

  • Earn $750 bonus cash back after you spend $6,000 on purchases in the first 3 months from account opening
  • Earn unlimited 1.5% cash back on every purchase made for your business
  • No Annual Fee
  • Redeem rewards for cash back, gift cards, travel and more through Chase Ultimate Rewards®.
  • Earn rewards faster with employee cards at no additional cost. Set individual spending limits for greater control.
  • Round-the-clock monitoring for unusual credit card purchases
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
0% Intro APR on Purchases 12 months
N/A 12 months
18.49% - 24.49% Variable
$0
Good/Excellent

BUSINESS CARD RATING

★★★★★
4.7

OVERALL RATING

  • 0% Intro APR for the first 12 months; 21.24% - 29.24% variable APR after that
  • Earn unlimited 1.5% cash back for your business on every purchase, everywhere — with no limits or category restrictions
  • No annual fee
  • Earn unlimited 5% cash back on hotels and rental cars booked through Capital One Travel
  • Rewards won't expire for the life of the account
  • Redeem your cash back rewards for any amount
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
0% for 12 months
N/A
21.24% - 29.24% (Variable)
$0
Good

BUSINESS CARD RATING

★★★★★
4.7

OVERALL RATING

  • Earn a one-time bonus of 50,000 miles – equal to $500 in travel – once you spend $4,500 on purchases within the first 3 months from account opening
  • Earn unlimited 2X miles per dollar on every purchase, everywhere, no limits or category restrictions, and miles won't expire for the life of the account
  • Unlimited 5X miles on hotels and rental cars booked through Capital One Travel
  • Transfer your miles to 15+ travel loyalty programs
  • Redeem your miles instantly for any travel-related purchases, from flights and hotels to ride-sharing services
  • Skip the lines with up to a $100 statement credit on TSA PreCheck® or Global Entry
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
N/A
26.24% (Variable)
$0 intro for first year; $95 after that
Excellent, Good

BUSINESS CARD RATING

★★★★★
4.7

OVERALL RATING

  • Earn a $750 bonus when you spend $6,000 in the first 3 months of account opening
  • Earn unlimited 1.5% cash back for your business on every purchase, everywhere — with no limits or category restrictions
  • No annual fee
  • Earn unlimited 5% cash back on hotels and rental cars booked through Capital One Travel
  • Rewards won't expire for the life of the account
  • Redeem your cash back rewards for any amount
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
N/A
18.49% - 24.49% (Variable)
$0
Excellent
Ink Business Premier℠ Credit Card Review

at the issuer'ssecure website

BUSINESS CARD RATING

★★★★★
4.7

OVERALL RATING

  • Earn $1,000 bonus cash back after you spend $10,000 on purchases in the first 3 months from account opening.
  • Earn unlimited 2.5% total cash back on purchases of $5,000 or more and unlimited 2% cash back on all other business purchases.
  • Travel Benefits: Unlimited 5% total cash back on travel purchased through Chase Travel℠, No Foreign Transaction Fees and Trip Cancellation/Trip Interruption Insurance.
  • The only business credit card with 2.5% cash back on every purchase of $5,000 or more.
  • For businesses who prefer to pay their balance in full each month, Ink Business Premier gives access to increased spending power, rich rewards, and premium benefits.
  • Pay off eligible purchases over time with interest up to assigned Flex for Business limit. All other purchases must be paid in full each month.
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
N/A
Flex for Business variable APR: 19.49% - 27.49%
$195
Good/Excellent

+See more business credit cards 

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 the 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.

Advertiser Disclosure

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