Here on our blog, you’ll find how to get business credit. Furthermore, we’ve shared a ton of articles about various funding options, lender reviews, and other relevant advice. What we haven’t revealed (publicly) is how to build your business properly to obtain credit, which is the core of our mission — the skills that Business Credit Workshop members master.
A high business credit score can help you increase funding options beyond the limitations of personal credit and even lower insurance rates.
Now, I’m going to lift the curtain and share the bricks you need to lay (and how to lay them) if you want to build business credit in 30 days. Here’s what’s in store:
I assume you are tempted to skip around, but I recommend you read the entire article. Each section contains little gems of wisdom to not only tell you what to do, but show you how to do it right.
If you’re ready, let’s go!
Intro: Business Credit FAQs
Before we explore the steps to take, I want to use this space to quickly answer some of the top questions I hear all the time about building businesss credit.
Can I use my EIN to apply for credit?
Yes, if you have an EIN assigned by the IRS, you can use it to apply for business credit.
Is it hard to get a business credit card?
No, it is not hard to get a business credit card, as long as you have a high business credit score.
Do business credit cards pull personal credit?
Some business credit cards do a soft or hard pull to your personal credit and some do not – the latter is rare.
Can an LLC have a credit score?
An LLC can have an employer identification number (EIN) and a DUNS number from Dun & Bradstreet. These identification numbers represent entities that can have credit scores separate from personal credit scores.
Can an LLC get a loan?
Yes, a business entity like an LLC or other corporation can apply for and get a loan.
Can I open a credit card for my LLC?
Yes, you can open a credit card for your LLC if it has a high business credit score.
Can I buy a house with business credit or can an LLC buy a house?
Yes, you can use business credit to purchase real estate on behalf of an LLC.
How long does it take to build business credit?
You can build business credit in as few as 30 days.
What are the easiest business credit cards to get approved for?
The business credit cards with the lowest credit requirements are typically store cards with net 30 payment terms.
Can you build business credit with bad personal credit?
Yes, you can build business credit with any personal credit score. However, many lenders require a personal guarantee, some require a hard or soft pull to your personal credit score, and poor personal credit limits your business credit options.
However, a low personal credit score isn’t a death sentence. Check out this Credit Secrets book review.
Now, how do you build business credit fast?
5 Steps to Build Business Credit
Since I started teaching owners how to get business credit, I’ve honed the process into a fully-sharpened, seven-step system. And, the first five steps of the proceess relate to business credit building; this is the first time I’ve shared them with non-members.
Before you get your hands dirty, here’s a quick tip: Business credit is a lot like personal credit — the fundamental rule is that you must pay your debts as agreed to maintain a good score. With that in mind, let’s dive in.
Step 1: Form Your Business
In construction, the first steps of building are to prep the site and lay a foundation. Likewise, your business needs a strong foundation: proper entity formation. Here are a few considerations.
First, your business name should be neutral. If you call your company Legacy Real Estate, your entity will be limited to funding options available to real estate companies. However, a company name like Legacy Management keeps you open to more generic funding options.
On a similar note, your business category should be neutral. Business Management is a safe category for most companies. And, you can always establish multiple brands under one legal entity.
Next, once you establish your business name, don’t change it. Lenders will want to see proof that your company is dependable and using the same business name over a long period will ensure this.
Finally, how do you want to establish your business entity? Would you like to hire an attorney to do it for you, use an online service like Legal Zoom, or do so manually through your local Secretary of State?
Step 2: Get Your Company “Business Credit Ready”
Think of getting “business credit ready” as adding a rough frame to a structure. Business credit readiness involves several steps.
- Establish your physical address (don’t use a P.O. box) – As a rule, a P.O. box doesn’t seem professional in lenders’ eyes.
- Get business insurance if you need it – Forbes lists 13 types of insurance that small businesses might need.
- Obtain the required business licenses – You will need to file your business with your local Secretary of State Office. Some towns require licensing for certain types of businesses. Check with your city or county to see what additional licenses you might need.
- Create an online presence – At minimum, your business needs a website and branded domain name. The name and address should be the same as what’s listed in your legal business entity records.
- List your business in relevant directories – You’ll want your business listed in relevant directories online and offline directories, including 411. Each of these directories should include the same information about your business (name, address, phone number, etc.). This will help your business appear more trustworthy and legitimate to lenders when you start the application process.
To accompany the above steps, you will also need a phone number and a business bank account. Here are a couple of tips.
- Get a local, physical, landline number. Either call your local phone provider for this or use an online (VOIP) service.
- Establish a business checking account that you plan to use long-term.
See Also: 3 Best Credit Unions for Small Business Banking
When the time comes to apply for credit, you may also need operating agreements and other business documents, so keep every record handy.
Step 3: Network With Local Banks
A network is crucial to success in anything. Buildings require electrical, plumbing, and HVAC systems while business credit involves a network of real people – bankers and other financial professionals.
If you can, attend local Chamber of Commerce events. If you’re not able to, network online with locals that you can build rapport with. Through authentic relationships, these people can teach you to about the underwriting processes for establishing major lines of business credit.
Note: When you drive around in your community, keep track of all of the small community banks and credit unions in you see. Then, research what financing programs they offer.
We recommend a spreadsheet of all business credit cards, business lines of credit, business loans, and other offers for each bank near you so that you can see them side-by-side before you make a decision. Furthermore, you’ll want to know if these banks lend their own money. If they don’t, find out who their underwriter is so you can get a feel for what the requirements will be.
Step 4: Setup Business Credit Profiles
Setting up business credit profiles is like installing insulation in a building. This is the padding within the walls of your business that will make it so that banks are willing to lend to you.
Your business will have a few business credit scores. The most important is your PAYDEX score from Dun & Bradstreet (D&B). Since businesses don’t automatically have a D&B profile, you will need to set yours up and establish a DUNS number.
You can expedite the process of obtaining a DUNS number for $49 so that you don’t have to wait a month to receive it.
See Also: Everything You Need to Know About a DUNS Number
You will also want to monitor your Equifax and Experian business credit scores, which can be done for free here:
If you do see inaccuracies, now is the time to fix them.
I recommend you monitor your business credit with Nav (essentially the CreditKarma for businesses). There are a ton of business credit monitoring services that cost anywhere from $4 to $30 per month. Stay away from them. You can get everything you need for free through Nav.
The only time I recommend paying for full credit reports and scores is if something doesn’t look right and you need to dispute or correct an item on your report.
Step 5: Build Small Trade Lines of Credit
To make a building habitable, you need to add drywall, flooring, siding, and roofing. And, in business credit, your small tradelines of credit are what actually seal the deal. Once you have established the proper number of tradelines and those tradelines have reported to the credit bureaus, you will have a perfect PAYDEX score.
See Also: 30 Day Net Vendors That Report to D&B
I’ll say it one more time: the key to a high business credit score is that the trade lines you establish report your on-time payments to business credit bureaus, including D&B. You can also use gas cards and store cards. Just be sure to do your research and make sure your payments will be reported.
While you might be able to qualify for some revolving lines of credit at this point, I recommend you always start with tradelines. Crawl before you walk if you want to remain stable.
Final Takeaway
Establishing and building business credit is crucial for companies who want more freedom in the way they fund their operations. Once you’ve completed the steps above, all you need to do is optimize your credit score and apply for funding, which is like adding trim, fixtures, mirrors, and windows then taking a final walk through the home you’ve built.
To dive deeper into the full, seven-step process, read exclusive business tips, learn exactly how to setup your credit profiles the right way, and ultimately learn how to obtain $100K in business credit in 30 days, sign up for Business Credit Workshop.
