Guide on Establishing Your Business Credit

Every business owner knows the importance of establishing and building business credit. Without a separate credit history, a business would find it more difficult to get approved for loans or new accounts. On the contrary, a solid and outstanding business credit not only ensures fast approval but also encourages great deals from potential lenders.

Why should you start establishing your business credit now? Establishing your credit history from the time you’ve launched your business is definitely an advantage. The older your business credit is, the more confident lenders would be on your ability to keep up with your payment obligations. Why is this important?

Sooner or later, as your business grows and expands, you’ll need to apply for new loans and other business financing options. As we’ve said, the more impressive your business credit history is, the better your chances are of getting the best of what lenders has to offer.

In addition, having a corporate credit protects your personal credit history from risks. If you fail to meet your deadline of payment on your business credit card, only your business credit will be affected and your personal credit history won’t have to suffer. Let’s discuss the requirements and information you’ll need to prepare before you can start building your business credit.

Legal entity. First of all, you need to clearly define the type of your business. To qualify for corporate credit, your business should be a corporation or an LLC (Limited Liability Corporation).

Physical Address. A legitimate business must have a physical address and telephone number. These two important contact details confirm that your business is really existent and not just a name.

Investor. Who is funding your business? Whether you have sought help or financial assistance from a lending company or a private investor, you must provide this information when applying for business credit.

Licensing. You should be able to present proofs that your business is already registered and has duly met all permits and business licensing requirements of your local State.

Personal credit. Since you don’t have a business credit yet, your personal credit would be used instead when you apply for a loan, a business line credit or a business credit card. Obviously, an excellent personal credit score increases your chances of getting approved and getting the best deals.

Credit Bureau. Dun & Bradstreet and Experian are the two known business credit reporting agency in the US. You can apply or register your company with these credit bureaus by filling out and submitting their online business credit application. Completion of the process can take up to 30 days, but once completed, you can be assured that all your dealings with your lenders and business partners will be reflected in your business credit report.

Paydex Score. Your Paydex Score is equivalent to your FICO Score. The Paydex score is used to calculate a business’s credit history. To build a high Paydex score, you need to prove your worthiness as a borrower. After registering your business with the credit bureau, getting a loan or a credit card and keeping up with your payments is the best way to build up your business credit.