A company's ability to function and expand is determined by its ability to earn money. Cash flow issues do arise from time to time, causing business owners to seek new funding sources. By 2020, more than a third of small businesses would be looking for funding. According to studies, you'll almost surely need to borrow money at some time to keep your firm afloat. A business, like a person, must establish a solid credit history.

Like your personal credit score, your company credit score may affect your ability to obtain a loan or a business credit card. Three commercial credit bureaus, Equifax, Experian, and Dun Bradstreet, give organizations a score ranging from 0 to 100. You may be familiar with Equifax and Experian, two credit-rating agencies. The higher your company's credit score, the better your chances of getting a loan or line of credit.

Don't wait until you're in a cash-flow pinch to start working on your business credit; the sooner you start, the better. You can get started by following the five steps mentioned below.

1. Set up a Business Entity

In the early phases of a business, it's usual for entrepreneurs to merge their personal belongings with the company's assets. However, this complicates the formation of the company as a separate organization. A firm is deemed officially created when it is registered or founded as a limited liability corporation (LLC).

An Inc. or LLC will usually insulate you from personal liability arising from business-related occurrences if you follow basic procedures. It's critical to begin handling the new business as if it were a separate organization. You'll need to establish that you've maintained your personal and business money separate, even if you've been in business for a long time. This will protect you from legal ramifications while also helping you create commercial credit.

In order for the commercial credit bureaus to register your organization, you must first incorporate. A company entity or a partnership is insufficient. You can start developing a business credit history after your company has been legally incorporated.

2. Obtain Your EIN

You can apply for a free EIN after your LLC or corporation is up and running. A company's EIN (Enterprise Identification Number) is comparable to a Social Security number. It will allow you to apply for credit cards and loans for your business, as well as open bank accounts and file taxes. In just a few minutes, you may apply for an EIN with the IRS online.

3. Get a Business Bank Account

You can open a business account once you have your Registration of Business and an EIN. Because maintaining a business bank account can be more expensive than maintaining a personal account, doing some research and comparing the fees charged by different banks is a good idea. While it may be more convenient to have your business and personal accounts with the same bank, you may find that switching to a different local bank is a more cost-effective option.

Even if your firm isn't yet financially active, opening a corporate bank account is one of the most efficient ways to demonstrate that your personal assets are different from your company's. It's a good idea to "lend money" to your firm if you need to pay for a business-related expense.

If you used your credit card to make purchases, you may be able to write yourself a check to reimburse yourself for business-related expenses. The most crucial thing to keep in mind is to separate your personal and business finances.

4. Apply for Business Credit

Equifax and Experian receive fresh company records from the Secretary of State on a regular basis. You will be recognized as soon as you form an LLC or incorporate.

The most widely used company credit bureau, Dun Bradstreet, has its own system. The bureau calculates three unique credit scores for your organization based on public data, industry data, and other criteria.

You'll need a data universal numbering system (DUNS) number to confirm your DB credit reports and make it easier for lenders and suppliers to offer you credit in the future. You could already have one if you've done business with suppliers before.

Here's a simple approach to improving your business credit. Net 30 Accounts, the most reputable and well-known business credit builder, assists you in establishing your business credit by performing all of the essential legal work.

5. Build Your Business Credit

It's time to start developing your firm's credit history now that you've finished the paperwork to register an official huge corporation and the credit agencies are following your organization. Establishing trade lines is one of the simplest and most effective tactics. A tradeline dealer will take payment after the items have been received. Many "net-30" stores allow you to pay for your purchases within 30 days of receipt.

Even the simplest commercial links are beneficial. Begin by looking for companies that provide similar services to yours. If they haven't already, request that they provide you with conditions and/or begin reporting your activities to the credit bureaus. The service of reporting is entirely free.

Request net 30 terms from your suppliers if you don't already have them. Consider the organizations listed below:

• Crown Office Supplies: Specific office supplies will very probably be required by your company. For $99.00 per year, Crown Office Supplies will set up a tradeline and report it to the credit bureaus.

• Grainger, an industrial supply firm, sells cleaning supplies and office equipment. Even for newer firms, getting a line of credit with the organization is rather simple.
• Wise Business Plans is another choice for business planning, website development, and logo creation. On a net 30 basis, you can open a net 30 account with them. If you're accepted, be sure you use the net-30 option when checking out. To develop a good track record for your firm, place little orders and pay your invoices on time or early.

FAQ: 

Do Business Credit Cards Report to Credit Bureaus for Businesses?

The majority of company credit cards are granted based on a person's personal credit history. Your card history will not be reported to the commercial credit bureaus if you apply for a corporate or business card that requires your Social Security number. Look for business cards that don't require a personal guarantee if you want to receive company credit.

What is Net-30?

A merchant or supplier may give you a line of credit called Net-30, which allows you to buy something today and pay for it in 30 days. To begin building credit, small firms should ask their vendors for a line of credit with net-30 conditions. Keep in mind, however, that if you fail to pay your payment on time, corporate credit bureaus will almost certainly keep track of your actions.