How to build my business credit?

Updated: Jul 7

If you’ve ever taken out a consumer loan then you probably already know how your personal finances and credit works. You likely understand where your personal credit score lands month- to-month and how debilitating a poor credit score can be.

While you may be aware of how your personal credit score works you might not be familiar with how your business credit rating functions. As a business owner, your business credit rating can significantly impact your financial reputation.

Why is it important to establish business credit?

Think of the importance of your personal credit score. A high score enables you to get the best rates and terms for loans, lines of credit and other types of funding. On the other hand, a poor score will limit the range of lending options available to you and will ensure you pay high interest rates.

In the same manner, your business credit rating can affect how suppliers and business lenders conduct business with you. Your business credit rating can reveal a wealth of information about your business. Do you pay your accounts on time? Have you defaulted on any payments?

Suppliers and lenders will use your business credit score to make decisions about the terms and interest rates they’re willing to extend to you. It’s essential you build a strong business credit score. It’ll open a range of opportunities for your business and help you to secure financing when it’s time to scale.

8 ways to build your business credit

Building your business credit the right way will set your business on the path to financial success. Let’s look at 8 ways to build your business credit.

1) Establish a business entity

If you’re reading this, there’s a good chance you’ve already formed your own business entity, but it’s important to understand that your business credit is separate from your personal credit.

Forming a sole proprietorship or general partnership means that legally, the business is still the same as the owner. As a result, there is no separation of personal credit from business credit. Forming an LLC or a corporation, however, will create a business that’s legally separated from the owner(s). Talk to a lawyer or an accountant to determine whether you should form an LLC or a corporation. Overall, if you’re not planning to issue stock, an LLC may be your best bet, but it is best to get professional advice regarding tax issues and reporting requirements that will affect your business.

2) Obtain a federal tax identification number (EIN)

Your EIN essentially acts as a social security number for your business. An EIN is required when you open a bank account under the name of your corporation or LLC, and it’s also required when you’re filing federal taxes. To abide by the requirements of the IRS, larger businesses often require an EIN from their vendors when conducting business. You can easily apply for an EIN on the IRS’s website.

3) Open a business bank account

Opening a business checking account under the name of your corporation or LLC is an essential step in building your business credit. Once the account has been opened, you should start handling all of the financial transactions of your business through that account. If you happen to use a business credit card to cover all of the expenses of your business, ensure that you pay the bill off with the bank account. You typically need a state business license and an EIN (or social security number for a sole proprietorship) to open a business bank account, plus a government- issued photo ID.

4) Establish a phone number for your business

It doesn’t matter what type of phone service you use (landline, VoIP, cellphone) it’s important you have a separate number for your business registered under your legal business name. This is the number you will use to list your business in directories to make it easier for your business to be found. Your service provider will report payments to credit agencies, helping to build your credit history.

5) Open a business credit file

An essential step in building business credit that many people often miss is opening a business credit file with TransUnion, Experian, and Equifax. Your credit file is what suppliers, vendors, and lenders will look at to gauge your financial reputation. The best way to get started is to apply for Business DUNS Number with Dun & Bradstreet, so you can establish a Paydex business credit score. Paydex is commonly used by suppliers and creditors, and you’ll also need a Paydex score to apply for a government contract, grant, or SBA loan. Choose the free option on the DUNS site.

6) Use one or more credit cards for your business

We can’t stress enough how important it is you separate your personal credit from your business credit. Therefore, you should open one or more credit cards that aren’t linked to you or your business partner(s) personal accounts.

7) Pay your bills on time every time

You already know this, but it bears repeating: if you want to build good business credit, you need to pay your bills on time, every time. Late payments will have just as much of a negative impact on your business credit as it would on your personal credit.

8) Open a line of credit with your suppliers and vendors

Find at least five vendors and/or suppliers to work with who are willing offer you a line of credit for purchases. As long as you pay your bills on time, this will create a history of positive financial transactions that future vendors/suppliers will reference when determining payment terms to offer your business. Look for vendors who report to credit bureaus.

Building your business credit, the right way

Building your credit score brings significant benefits to your business. It’ll help ensure you receive the best payment terms when working with new suppliers and vendors, you’ll receive the best rates from lenders, and you’ll establish a good reputation for your business.

But business credit takes time to build. In the meantime, you’ll need capital to grow and expand your business. We can help. Amerishop Financial partners with an extensive network of funders who provide merchant cash advances to owners of small and medium-sized businesses.

Apply today to get the funding you need to keep your business on the move.

Visit or call 877.407.9195 and connect with a funding expert to discover the options that make sense for you and your business.