For many owners, an important part of owning a successful business is being able to borrow money for business needs and expenses such as new equipment, building upgrades, etc. However, just like in personal finance, you can’t just go out and get a business loan without having good credit. While the process is a little different, businesses have credit scores just like people do, and just like people, they require good credit scores to be able to qualify for operating loans, good interest rates on building business credit , etc. Which means that as a business owner, you need to pay attention to building business credit.
The key to building business credit is separating your business credit from your personal credit, in order for your business to be able to build a good reputation on its own. In order to do this, your business must be a separate entity, which is done either by incorporation, or by forming an LLC. Just like a person, your business will also need an identifying number in order to build credit, although in business this number is a FEIN, or Federal Employer Identification Number. Your business will also need a D-U-N-S number, issued by Dun & Bradstreet to verify the credit history of businesses.
In addition to these thing, your business will also need bank accounts that are separate from your personal accounts, a separate phone line, and it will need to be compliant with all state and local regulations. You’ll also want to apply for a business credit card or line of credit, which will be how your business initially shows up in each credit reporting agency’s files. From there, building business credit is much the same as building good personal credit; paying bills on time, not declaring bankruptcy, not defaulting on loans, etc.
Building a successful business is a lot of work, and can be even harder when your business doesn’t have good credit, or any credit at all for that matter. By doing the things listed above, you can begin building business credit. And by following the rules of building good credit, which apply to both individuals and businesses, you can assure that your business will continue to have good credit as you grow and expand.