How to Build Business Credit
First, you must set up your business as an official entity. You can do this most easily by establishing a corporation or an LLC. File officially with the secretary of state, and get all the necessary business licenses and permits required by your state, county and city. You will need to use a physical address for all of these filings and registrations, but fortunately you can use your home address if you do not have an outside office. Even if you use a PO box for your mailing address, you can use your home address as your physical address.
Secondly, register your business with the business credit agencies. The big agencies are Dun & Bradstreet, Experian Business and Equifax Business. Getting a D-U-N-S number from Dun & Bradstreet is your most important first step in getting business credit.
Last but not least, apply for business accounts with creditors. Don’t go overboard here, of course, but start by applying for a business credit card, and getting accounts with suppliers like office supply companies that offer business lines of credit.
Control Your Spending
Once you have business credit, make sure you keep your spending under control and make your payments on time. Whenever possible, make more than the minimum payment, and always stay on top of your bills so you keep a high credit profile.
Keep an eye on your business credit reports, from all the agencies. Especially take a look at the reports before you apply for major credit like a commercial loan; you don’t want any mistakes to keep you from getting the credit you deserve.
It can take time to build your business credit, but if you are very careful with the credit you’re offered, and make your payments on time, you can develop a very good business credit profile in a few months.
When you’re ready to seek a commercial loan, you will need business references and financial statements, as well as all of your business organization documentation and licenses. These items, as well as your business credit profile, will help you prove to a lender that you have a going concern and not a hobby.
One last thing you can do immediately to prepare for applying for commercial loans later is to write your business plan. If you write it now, and start building your business according to a solid plan, you can write a “business plan actual” report later to show how your business has performed according to plan. This will help you get the credit you need by showing that your business is performing well. Having access to credit will help you run your business well.
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