Starting and growing a business often requires access to capital. While personal savings or loans might get you off the ground, business credit can be a game-changer for long-term success. It allows you to finance operations, purchase inventory, or invest in growth without dipping into your personal funds. But how exactly do you obtain business credit? This article will walk you through the process, from laying the groundwork to building a strong credit profile that opens doors to better financing options.
What Is Business Credit?
Before diving into the “how,” let’s clarify what business credit is. Business credit is a financial tool that allows your company to borrow money or access goods and services with the promise to pay later. It’s separate from your personal credit, meaning your business’s financial behavior stands on its own. Lenders, suppliers, and creditors use your business credit score to assess your company’s creditworthiness.
Unlike personal credit, which relies heavily on your Social Security Number (SSN) and personal financial history, business credit is tied to your Employer Identification Number (EIN) and your company’s financial track record. Major business credit bureaus like Dun & Bradstreet, Experian Business, and Equifax Business track this data and assign scores. A strong business credit profile can unlock lower interest rates, higher credit limits, and better terms with vendors.
Now, let’s explore the steps to obtain business credit.
Step 1: Establish Your Business as a Legal Entity
You can’t build business credit until your business is recognized as a separate entity from yourself. If you’re operating as a sole proprietor without formal registration, your business and personal finances are legally intertwined. To obtain business credit, you’ll need to formalize your business structure.
- Choose a Business Structure: Options include a Limited Liability Company (LLC), corporation (S-Corp or C-Corp), or partnership. An LLC is popular for small businesses due to its flexibility and liability protection. Research which structure suits your needs and register with your state.
- Get an EIN: Apply for an Employer Identification Number (EIN) through the IRS website. It’s free and takes minutes. Think of your EIN as your business’s SSN—it’s essential for tax purposes and opening business accounts.
- Register Your Business: File the necessary paperwork with your state or local government. This might include articles of organization (for an LLC) or articles of incorporation (for a corporation). Fees vary by state but typically range from $50 to $200.
Once your business is legally established, you’ve laid the foundation for separating your personal and business finances—a critical step for obtaining business credit.
Step 2: Open a Business Bank Account
With your EIN in hand, open a dedicated business bank account. This reinforces the separation between your personal and business finances, which creditors and credit bureaus look for when evaluating your company.
- Choose the Right Bank: Look for a bank with small business services, low fees, and perks like online banking or integration with accounting software. National banks like Chase or Wells Fargo, as well as local credit unions, are good options.
- Provide Documentation: You’ll typically need your EIN, business formation documents, and personal identification to open the account.
- Maintain the Account: Use this account exclusively for business transactions—deposits, expenses, payroll, etc. A healthy cash flow and consistent activity signal financial responsibility to potential creditors.
Some banks also offer business credit cards or lines of credit once you’ve established a relationship, which can be an early step toward building credit.
Step 3: Get a DUNS Number
A DUNS Number is a unique nine-digit identifier issued by Dun & Bradstreet (D&B), one of the primary business credit bureaus. Many lenders and suppliers require it to check your business credit profile. Without it, your credit-building efforts might not be tracked properly.
- Apply for Free: Visit the Dun & Bradstreet website and request a DUNS Number. You’ll need to provide basic business information like your legal name, address, and EIN. The process is free, though D&B may try to upsell you on credit monitoring services (optional).
- Wait for Processing: It can take up to 30 days to receive your DUNS Number, though expedited options are available for a fee.
Once you have a DUNS Number, your business is on the radar of the business credit world. Now, it’s time to start building that credit profile.
Step 4: Establish Trade Lines with Vendors
One of the easiest ways to start building business credit is through trade lines—credit accounts with suppliers or vendors who report your payment history to credit bureaus. These are often more accessible than traditional loans or credit cards because they don’t always require an established credit history.
- Find Net-30 Vendors: Look for suppliers offering “net-30” terms, meaning you have 30 days to pay for goods or services. Examples include Uline (office supplies), Quill (business products), or Grainger (industrial supplies). Some may require a few initial cash purchases before extending credit.
- Pay on Time (or Early): Timely payments are the backbone of a good credit score. If possible, pay early to impress vendors and boost your credit profile.
- Confirm Reporting: Not all vendors report to credit bureaus. Before signing up, ask if they report to Dun & Bradstreet, Experian, or Equifax. If they don’t, your efforts won’t build your credit.
Start with one or two trade lines and manage them responsibly. Over time, this builds a track record that other creditors can see.
Step 5: Apply for a Business Credit Card
A business credit card is a powerful tool for building credit and managing cash flow. Many issuers report activity to business credit bureaus, helping you establish a credit history.
- Choose the Right Card: Look for cards designed for small businesses, like the Chase Ink Business Preferred, Capital One Spark Cash, or American Express Business Gold. Some cards offer rewards (cash back, travel points) and don’t require a stellar credit history to start.
- Use Your EIN: Apply using your EIN rather than your SSN whenever possible to keep the account tied to your business. Some issuers may still check your personal credit, especially for new businesses, but this becomes less common as your business credit grows.
- Keep Utilization Low: Aim to use no more than 30% of your available credit limit. For example, if your limit is $10,000, don’t carry a balance above $3,000. High utilization can hurt your score.
- Pay in Full: Pay your balance on time every month—or in full, if possible—to avoid interest and demonstrate reliability.
Start with a secured card (backed by a deposit) if your business is too new for an unsecured card. After a year of good payment history, you can often upgrade.
Step 6: Monitor and Build Your Credit Profile
Building business credit is an ongoing process. Regularly check your credit reports with Dun & Bradstreet, Experian, and Equifax to ensure accuracy and track progress.
- Sign Up for Monitoring: Services like D&B’s CreditSignal (free basic version) or Nav (a small business credit platform) let you see your scores and get alerts about changes.
- Fix Errors: If you spot inaccuracies—like a missed payment that was actually paid—dispute them with the credit bureau. Provide documentation to support your case.
- Add Positive Data: Some bureaus, like Experian, allow you to manually add trade lines or payment history (e.g., rent or utility bills) if the provider doesn’t report automatically.
A strong score—typically 80+ on Dun & Bradstreet’s Paydex scale or 700+ on Experian’s Intelliscore—shows lenders you’re a low-risk borrower.
Step 7: Apply for Larger Financing (When Ready)
Once you’ve built a solid credit history—usually after 6-12 months of consistent payments—you can pursue bigger financing options like business loans or lines of credit.
- Business Loans: Banks, credit unions, and online lenders (e.g., Kabbage, OnDeck) offer term loans for specific needs like equipment or expansion. Requirements vary, but a good credit score and revenue history improve your odds.
- Lines of Credit: A business line of credit gives you flexible access to funds up to a set limit. It’s ideal for managing cash flow or unexpected expenses.
- SBA Loans: The Small Business Administration (SBA) backs loans with favorable terms for qualifying businesses. The SBA 7(a) loan, for example, can provide up to $5 million with low rates.
Lenders will look at your business credit score, revenue, time in business, and sometimes personal credit. The stronger your profile, the better your terms.
Tips for Success
- Be Patient: Building business credit takes time. Focus on consistent, responsible financial behavior.
- Separate Finances Completely: Never mix personal and business expenses. This protects your personal credit and reinforces your business’s legitimacy.
- Network with Vendors: Ask existing suppliers for credit terms or referrals to other credit-friendly vendors.
- Avoid Overborrowing: Only take on credit you can manage. Defaults or late payments can tank your score.
Common Pitfalls to Avoid
- Skipping the EIN: Without it, your business won’t have its own credit identity.
- Ignoring Personal Credit: Early on, some lenders may check your personal score. Keep it healthy until your business stands alone.
- Missing Payments: Late payments are the fastest way to damage your credit. Set reminders or automate payments.
- Not Checking Reports: Errors can go unnoticed if you don’t monitor your credit.
Why Business Credit Matters
Obtaining business credit isn’t just about borrowing money—it’s about creating opportunities. A strong credit profile can help you negotiate better terms with suppliers, secure larger contracts, or weather financial hiccups. It also protects your personal assets by keeping business liabilities separate.
For example, imagine you run a small retail store. With business credit, you could order inventory on net-30 terms, sell it, and pay the supplier later—freeing up cash for marketing or hiring. Or, if a big client delays payment, a line of credit could cover payroll until the invoice clears. These scenarios highlight how business credit fuels growth and stability.
Final Thoughts
Obtaining business credit is a journey, not a race. Start by legitimizing your business, opening accounts, and building a payment history with vendors and credit cards. Monitor your progress, correct mistakes, and scale up to larger financing as your business matures. With discipline and strategy, you’ll create a credit profile that supports your entrepreneurial vision.
Whether you’re a startup founder or a seasoned small business owner, business credit is a tool worth mastering. Take the first step today—your future self (and your business) will thank you.