Raising Money

Business Credit Building

What's your business credit score? Business credit building is the exercise of establishing the creditworthiness of your business so that your business can borrow money without your having to give a personal guarantee.

If you are a small business owner and have not yet made business credit building a priority initiative at your organization, you are making a mistake.

Business Credit Building

Business credit building allows you to get small business loans, obtain business credit lines, and secure business leases with no personal credit checks and no personal guarantees.

Every new business owner should be motivated to separate their personal credit from their business credit and access business-only credit sources.

Until you establish your business credit, you will always be asked to put your personal assets at risk. This puts you at risk of personal bankruptcy and can result in such terrible scenarios as losing your home or getting divorced because of the intrusion of business creditors into your personal life.

Until you focus on building business credit, you will undoubtedly fail in your attempts to secure business loans.

In fact, statistics show 95 percent of all businesses that apply for a business loan are declined. Clearly, those who are rejected for a small business loan do not understand the importance of building business credit.

So How I Do I Build Up My Business Credit Rating?

The process of building a business credit profile starts with having a separate legal organization for your business.

That is the essential first step in separating business credit from personal credit. If you haven't yet gone through the formal company formation steps of incorporating your business, stop reading this article now and jump over to our helpful advice on forming a company. The best organizational structures for building business credit are the C corporation, S corporation and limited liability company

So you've already incorporated or finished forming an LLC? Great!

Here are four things you now need to do to build your business credit score up to the point where you will no longer have to personally guarantee all of your business loans.

  • Register with the credit reporting agencies such as Dun & Bradstreet and Experian - For example, visit the Dun and Bradstreet and apply for a D&B number. Their charter is to provide accurate, impartial and trusted information about businesses to facilitate commerce.
  • Get all licenses and permits required to operate the business - When applying for business credit, it's very important that you have all your business paperwork in place and are in good standing.
  • Get a small business checking account - Go to a local bank or one of the large national banks and set up a business bank account.
  • Register the company with Directory Assistance - Having a White Pages listing and being listed in National Directory Assistance is a must if you are applying for business credit. See our article on how to get a business into the white pages and into Directory Assistance to learn how it's done.

There are many other things you need to do to establish a strong business credit rating.

Business credit score providers look at whether you are paying bills on time, avoiding late payments and filing tax returns and liens on time, among many other things.

There are some excellent business credit consulting firms that are very tuned into how to establish a strong business credit profile. If you are busy or feel like you need the help, it's a smart move to work with a reputable business credit building firm.

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