Easily Start Building Your Business Credit in 30 Days or Even Less Leave a comment
Good credit is important for your business. It makes it more likely that you can be approved for a business loan, pay lower interest rates, and will increase your cash flow fluidity. This guide will help show you how to build business credit fast, and throughout the article be sure to look for our Business Credit in 30 Day Hacks.
Building good credit includes several steps. First, you must have the means with which to make payments. This could be income from your business or in the very beginning, it could be income or savings from a regular job. More often than not, small businesses are built while moonlighting, that is working your regular 9-5 job while building your empire in the evenings.
Next, create a business profile. This might mean signing on with an agency, creating a website, or other activities to make your business visible. Next, review your current business credit report. We have some tools free and paid to help you review the vendors who do and don’t report your payments.
Although mortgage and car payments are likely to count on your personal credit which require a personal guarantee and a social security number, business credit is an entirely different game. An easy way to build good credit is through NET 30 vendors who report positive history when you pay your bills. For building good credit, regular, adequate, payments are essential.
It Takes Time but in a 30 Days you can Build Business Credit.
Personal credit scores are likely to come into play when requesting large bank loans. Anyone telling you otherwise is selling you snake oil. On the same note, without business credit you can have a perfect personal credit score and still get denied for business loans. Checking your personal credit score and creating a plan to establish your business credit will improve your chance of obtaining funding for your business.
Even if you have a perfect credit score as an individual, your business is considered to be a separate entity from your personal financial operations. However, the first steps to building business credit can begin within your first thirty days of operation.
Once you have a business profile set up (website, ein, duns, phone number, etc), you can begin building that all important credit history for your business. This is likely to take longer than thirty days, but the time to start creating a positive credit history is right away. This can include opening a business checking account, requesting a D-U-N-S number, and making sure that often overlooked items, such as past-payments are taken care of.
To get started with establishing your good business credit, take the following action steps:
Creating your Business Profile
Begin with incorporating your business. This is a fairly straightforward process. Select a name that has not been taken and register with your secretary of state.
Open a business checking account, and budget a regular draw for your personal income. This not only helps with your business credit, it makes keeping track of your cash flow much easier.
You can reduce the amount of time it takes to set up these initial processes by using the Internet to create accounts and to communicate with Federal, state, and local agencies.
Often, this will cut the communication process down from three days or a week to less than twenty-four hours. Office processing times might vary, but you can get your part of the process done quickly and easily when online applications exist.
In a few cases, especially when dealing with local agencies such as local business associations, online options might not be available. Your time invested, however, will be much shorter if you do as much as possible online.
Business Incorporation
Incorporating your business establishes it as a separate entity from you and your personal finances. It helps focus your business operations, strengthens the presence of your brand, and even limits your personal liability for business debts.
30 Day Business Credit Hack #1
We have found that registering in Wyoming has an average turn around time of just 2 days. We love Cloud Peak Law Group. The cost is around $199 for the basic plan, but if you would like they have additional services such as virtual addresses, receptionists, mail forwarding, etc.
Again, this is frequently influenced by location. Taking advantage of online applications and processing will significantly shorten the amount of time consumed.
Get an Employer Identification Number (EIN)
An employer identification will be required if you plan to hire regular staff.
However, it is also useful as an identification number for your business, making it easy to open bank accounts and to apply for credit as your company rather than as yourself. In most areas, applications are available online and take as few as ten minutes to fill out.
You might receive your EIN almost immediately, or there might be a waiting period. It is a good idea to get this process started early.
Open a Business Bank Account
A business bank account is useful for keeping your business income and expenses separate from your personal accounts.
To have money for yourself, you can schedule an amount that can be used for your personal expenses. More than that, it will be easy to show prospective credit sources your cash flow, which is important to them since they wish to be repaid.
The best business account allows you to either open an account online or at the very least to access your accounts online. Being able to open your account and download a statement facilitates obtaining credit.
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Azlo offers free online checking for businesses and has a very quick set up process. In our 30 Day Business Credit Hack #1 we recommended using Cloud Peak, who will provide all the operating agreements and documents you need to get set up with Azlo.
Establishing a Business Profile
There are three credit reporting agencies which you will want to establish a business profile. They are Experian, Equifax and Dun & Bradstreet. There are several smaller ones which you should also be sure not to skip such as CreditSafe, LexisNexis, and SBFE. Listed below are the procedures for establishing a presence with each:
Dun & Bradstreet
Dun & Bradstreet is a well-known name in credit reporting. They use public information, vendors, and payments to create reports.
But, unlike Experian and Equifax, you must first be a member to have an D-U-N-S report. You can easily do this by requesting a D-U-N-S (data universal numbering system) number. Each company receives a unique number that acts as an identifier.
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Want to expedite getting your DUNS for free? If you plan on bidding for government contracts, you can always expedite your DUNS process by going through the SAM Webform. This is free and should turn around in 48 hours.
A standard application will take approximately 30 days, but you can (for a fee) ask to have it expedited. If you are contracting with a government agency, the process will take less than one business day.
Experian and Equifax
Although Experian and Equifax report on your business transactions, there is no need to set up a profile with them. It is a good idea to verify that your business is in the system.
You can add your own business information to Equifax. It is advisable to check all three frequently. The reports are available online and take only a few minutes to look through.
CreditSafe
Although smaller, CreditSafe is quickly becoming the go-to for smaller businesses to pull credit data for lending. Their cost effective service with a clean user interface is simple enough for smaller lenders to use, and many are switching to their platform.
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Getting on the CreditSafe is usually automatic like Experian and Equifax, but you can expedite this service and get free monitoring using their Stay Safe Program. This can also alert you to any past tax liens, UCCs, and also helps you monitor your progress with your trade vendors.
SBFE
Unlike the other bureaus, SBFE isn’t actually a bureau, but a data service that works along side them. SBFE members like American Express and the 10 largest US business card users report their data to the above bureaus. This data is blended with the above scores to provide further exchanged data to SBFE members. You can request a free copy of your SBFE report with Experian, Equifax, and D&B by contacting the bureaus.
Review Business Credit Profile
Review your credit profile regularly, with all three services. By reviewing your profile, you can discover if there are any inaccuracies.
It is also a good way to jog your memory so that small debts, such as minor credit cards, or library fines, are not forgotten.
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Nav.com has an excellent credit monitoring service that reports your payment experience to the bureaus. This is a quick way to boost your scores. Alternatively you can sign up with CreditSafe’s tool for free to also check your reports, although this wont report your payments to the bureaus.
Make Sure You Have Correct Business Information
Set up a branded email and website for your business. Monitor your business correspondence, email, and website to make sure that your correspondence remains consistent.
You can miss out on credit history if your business information is inconsistent. Your physical mailing address and business phone number should also match.
Payments might not be accurately recorded if your transactions do not all match. This can lead to a loss of good credit history that would otherwise help build your credit reputation.
Report Credit Report Errors
Another reason for checking your credit report frequently is to discover any errors or discrepancies. If you discover an error, report it at once.
You will be expected to follow up with supporting documentation sent through email or regular mail. An investigation will then ensue and might take up to 60 days to process.
Build a Payment History
Good credit is important for any businessperson, but it is especially necessary for wholesale and retail seller, contractors, and even service businesses that might need to purchase supplies.
Good credit, with a history of making timely payments, demonstrates to vendors that they can advance supplies and materials to you, and expect to receive timely payments on account.
With good credit, you can often open a line of credit online, and have it ready to go within minutes. Some companies might take a little longer to verify your accounts, especially if you have a glitch or two in your payment history.
Maintaining good credit takes effort, but it is well worth it.
Vendor Credit Lines
While cash and carry can be a good policy for staying out of debt, as your business grows that might not always be possible.
Establishing good credit with a vendor who maintains a net 30 account, that is a policy of advancing materials or supplies for 30 days before requiring payment, while you have the funds to cover your purchase can be a good policy. This allows you to establish a good rapport with that company and a line of credit that will enable growth.
Establishing and maintain good credit with vendors means that when you have an unexpectedly large order for an item, or a major service event, or even some sort of emergency, you have credit available to acquire the necessary goods to take advantage of profitable situations or to float your company through emergencies.
By paying your invoices on time or even a little early, you can easily maintain a good credit score or even increase it over time. It can take up to sixty days for vendors to report new account activity to credit agencies. Therefore, while you can start building your line of credit during your first month of operations, it might take a little longer for the results to be evident.
NET 30 Vendor Credit Lines
While cash and carry can be a good policy for staying out of debt, as your business grows that might not always be possible.
Establishing good credit with a vendor who maintains a net 30 account, that is a policy of advancing materials or supplies for 30 days before requiring payment, while you have the funds to cover your purchase can be a good policy. This allows you to establish a good rapport with that company and a line of credit that will enable growth.
Establishing and maintain good credit with vendors means that when you have an unexpectedly large order for an item, or a major service event, or even some sort of emergency, you have credit available to acquire the necessary goods to take advantage of profitable situations or to float your company through emergencies.
By paying your invoices on time or even a little early, you can easily maintain a good credit score or even increase it over time. It can take up to sixty days for vendors to report new account activity to credit agencies. Therefore, while you can start building your line of credit during your first month of operations, it might take a little longer for the results to be evident.
Get a Business Credit Card
If you have little or no credit, or if you are struggling with bad credit – personal or business, an easy approval credit card is a good way to get started on the road to having good credit. It is important to select a card that reports to Experian, Equifax, and D&B in order for it to affect your credit standing.
Business owners can use their EIN as an identification number and avoid mingling their business and personal credit ratings. This can protect your personal financial standing just in case your business doesn’t work out, and it can protect your business from personal financial problems.
Most applications for business credit cards can be completed online, although it might take a few days for a physical card to arrive in the mail. If you are using a phone to store your financial information, the process might be nearly instantaneous.
Business Retail Credit Line
Big retailers such as Sam’s Club, Staples, or Lowe’s frequently offer business accounts that include a dedicated store credit card. It’s time for a shameless plug, but Crown Office Supplies is the ultimate starter vendor for building business credit. We extend NET 30 trade terms to new businesses, and in exchange for your timely payment, we report the positive payment history to the bureaus.
This is handy for contractors, suppliers, party planners, and similar businesses because it enables purchasing essential products as needed. You can often use these cards almost immediately upon applying, especially if you have good personal or business credit.
These store cards will impact your credit rating, so having one that is in good standing will have a positive effect on your score. As with most lines of credit, it can take six weeks or more before you begin to see changes.
How to Build Business in a Month!
Pay State Fees on Time
Federal and state fees do show up on your credit rating. Incorporated businesses are required to pay annual filing fees. Should companies discover that you are behind on your fees, it can be a reason for immediate denial of financing.
Fees will vary from state to state and might vary according to the type and volume of business. They will typically run between $50 to $400 annually. Overdue fees can be paid to the Secretary of State in the state where you do business.
Payment of fees is a matter of public record, so businesses can cross-reference your establishment on state websites. Payments, on-time or overdue, will typically be processed in three to ten business days.
Don’t Delay Payments to Vendors
Vendors like to be paid on time. It helps them with keeping their creditors happy and taking care of their other necessary business expenses.
Sometimes, you can even save money by paying your accounts early. Plus, it improves trust and shows up on your credit rating. Scheduling payments early also minimizes the risk of running late with payments.
Vendor accounts do impact your credit rating. It isn’t enough just to establish an account. Keeping it in good standing provides your business with a valuable resource while at the same time improving your business credit score.
Use a Legal Document Service
A legal document service can help you build credit even faster by processing your paperwork for you. They still go through the state where your business is registered, but they take some of the mystery out of filling out documents and dealing with legal paperwork.
More than that, if dealing with paperwork is not your business’ main focus, the document service can save you time.
We love the service at https://bizcounsel.com/. For $90 a month you are connected with a real attorney in your area who can help you navigate documents and all the legal jargon you will come up against.
By taking items that you have already paid into consideration, you can build your credit even faster.
Pay a Fee for Speedy Processing
Money talks, and it can make your applications go through more quickly. Companies that are charged with rating businesses as being creditworthy are often willing to send your application to the head of the queue in return for payment.
For example, if you are willing to part with $299, you will not have to wait thirty days for your D-U-N-S number from Dun & Bradstreet. You can then have your number in five days or perhaps even less.
FAQs
Here are some of the questions that are frequently asked about building your business credit.
How to build credit for an LLC?
Building good credit for your LLC involves reviewing your personal credit, setting up a business profile, developing payment history with vendors and stores, and maintaining a good credit history. You should also check the various agencies to make sure their information is correct.
If I have bad personal credit, can I get a business credit card?
Yes, there are companies that specialize in credit cards for people with bad credit. To get one, you frequently must secure the card with a cash deposit that will be kept as collateral.
Typically, companies that provide business cards prefer credit scores or 670 or better. The specialty companies are set up to help people who have lower credit scores so they can build up their reputation and rating.
Conclusion
Good credit is a business asset. Building it fast is a step by step process, but as the old saying goes, “soonest begun, soonest done.” You want to begin establishing your credit rating as soon as you have your business registered and have acquired the requisite numbers, such as the EIN.
You can get the initial steps accomplished within the first thirty days of opening your doors, but it might take more than four months to build up a good credit score and establish revolving accounts with vendors.
Good ways to build credit include Net 30 Vendors such as Crown Office Supplies, big box stores with credit cards, and dedicated business cards. Keeping up with payments and even paying ahead will build the kind of goodwill you need for your business and make your credit rating soar.