Building good business credit is a smart investment of your time, energy, and resources as a business owner. Good business credit can make it easier to secure financing for your company when you need it, and often to get that financing at a better price.
Yet the benefits of establishing a strong business credit profile matter even if you’re not applying for a loan, credit card, or line of credit. Good business credit can save you money on insurance premiums and security deposits. It can help you to secure better terms from suppliers and receive higher credit limits. Strong business credit can even make it easier to keep your personal and business credit separate.
Of course, understanding the importance of building credit for your business is only half the battle. You might be ready to establish credit for your business, but that doesn’t mean you know where to start.
BusinessLauncher offers helpful, step-by-step guidance on how to build business credit. This free tool from Nav shows you how to establish your business the right way and build a strong business credit profile.
Here’s a breakdown of how BusinessLauncher works.
Getting Started: Create a free Nav account in a few short minutes. Once you’ve created your account go on to the following steps:
Step 1: Review your business and personal credit reports.
When you sign up for a free Nav account, you’ll have access to free business credit ratings and reports from Dun & Bradstreet and Experian.. You’ll also be able to access your personal credit score and report from Experian. In fact, Nav is the only place where business owners can access a summary of both their personal and business reports in one spot.
You can also upgrade to a Premium account to access more details. The Standard account allows you to access a high-level overview of your credit. A Premium account, on the other hand, gives you detailed personal credit reports (Experian and TransUnion), business summary credit reports, plus your actual business credit scores (rather than credit grades).
Steps 2-4: Make your business legitimate.
To establish credit for your business, you’ll first need to make sure your company looks legitimate so lenders can feel more comfortable about doing business with you. Use the BusinessLauncher tool to walk through important steps like setting up a legal entity for your business, filing for a Federal Tax ID number, and registering your business with Dun & Bradstreet – one of the major business credit reporting agencies.
Completed some of these steps already? You can let the system know and skip any previously completed steps.
Step 5: Establish a business credit history.
They key to building good business credit scores is to make sure you have accounts that report your payment history to commercial credit agencies, and then pay those account on time. But many companies don’t report to these bureaus.
Business credit cards are often a wise place to start, especially if you have good personal credit to help you qualify, but they aren’t your only option. BusinessLauncher will also help you identify vendors that report. Purchase supplies you need for your business from vendors that report, then pay the invoice on time, and you’ll build a positive business credit history.
Steps 6-13: Set your business up for success.
It’s important to open some initial accounts to help your business establish credit, but there’s a lot more work in store if you hope to qualify for certain types of financing in the future. In addition to managing your credit accounts the right way (think on-time payments, all the time), you’ll need to follow several other best practices to set your business up for success in the credit department.
BusinessLauncher can guide you through these important steps to help ensure your business is creditworthy – from finding a good accountant, to establishing a solid business plan, to making sure your company has the right type of online presence.
Frequently Asked Questions
How Do You Establish Business Credit?
The concept of establishing business credit is easy enough to understand.
- Find lenders or vendors willing to issue a credit card, extend net-30 terms or provide other financing to your business.
- Make sure the lender will report to at least one of the business credit reporting agencies.
- Manage your new account properly so it can help (not hurt) your business credit profile. (Tip: your payment history is a big deal when it comes to any personal or business credit score.)
Building business credit doesn’t have to be complicated, once you know where to get these types of accounts, BusinessLauncher will help you get started.
How Do I Build Credit for my LLC?
Although it’s possible to build business credit as a sole proprietor, it’s important to incorporate your business, so that it is legally separate from your personal credit and finances. If you’ve set up a limited liability corporation (LLC), S Corp or C Corp, you’re already a step ahead in the process of preparing to establish credit for your business.
There are more than a hundred business lenders to choose from when you are ready to build business credit for your LLC. The trick is to find lenders who are more likely to approve your application and, once approved, report your account activity to the business credit bureaus.
A free account from Nav can help give you personalized financing recommendations to make this process easier.
How Can I Build My Business Credit Fast?
You might wish you had a business credit builder magic wand (especially if you need fast funding for your company). While it takes time to build solid business credit, you’re likely to be pleasantly surprised by how much progress you can make by just taking the steps outlined here. Many business owners aren’t checking their business credit, much less trying to build it; so if you simply follow the steps above, you should start seeing results
Still, there are some ways to jump start the process. Check out this helpful guide of 6 ways to start building business credit in 30 days.
How Do I Build Up My Business Credit Without Using My Personal Credit?
Strong personal credit scores can be helpful when you own a business. Good personal credit can make it easier to qualify for business financing and to secure better rates and terms as well.
Most small business owners rely on personal credit to some degree, especially in the early stages of their business. A small business credit card, for example, almost always requires a personal guarantee and may even show up on your business and personal credit reports. Some vendors don’t check personal credit, so you can begin to build business credit even if your personal credit scores aren’t strong. Ultimately, though, the best way to try to get away from personal guarantees is to establish a strong business credit profile. Once you’ve reached this goal, you can look for lenders and vendors who don’t require personal guarantees or you can try asking a credit manager to waive the requirement.
Ultimately, your goal is to get affordable financing for your business when you need it. Nav will match you to the best offers, based on your credit and financial profile. To make the most of this service make sure you
- Add your business to your account.
- Complete your business financing profile including your business start date, industry type, and estimated annual revenue.
- Link your business checking account to demonstrate business revenues.
This article was originally written on May 23, 2019 and updated on December 9, 2020.