How to build Business credit: Building business credit by ten important steps

Business credit repairing

 Get bad credit business loans for your business and have your credit repaired.
Get bad credit business loans for your business and have your credit repaired. | Source

Build business credit


As an entrepreneur you have an unique opportunity to build, maintain and acquire business credit as well as personal credit. You can have both as an individual and as a business owner. You need not to rely solely on your personal credit to do that.

How to build Business credit?

Building business credit needs step by step process. You can build your business credit by following these processes. A credit profile starts with personal credit reporting agencies, when a holder of social security number applies for first credit card or accepts one’s first job. This profile is also known as a credit report. It is added to with every credit inquiry and credit applications. Those issuing credit typically report the information to the credit bureaus. The credit report is a statement of an individual's ability to repay one’s debt.

Personal credit scores range from 300 to 850. 680 or higher score is considered as excellent. Personal credit differs from business credit. Business credit scores range on a scale from 0 to 100. 75 or more is considered as an excellent rating.

Only few of all entrepreneurs truly understand about establishing and tracking business credit. However, it affects their lives and businesses, advises a member of the business credit industry. We will discuss some steps you can take to build your business credit.

Do not mix your personal credit with your business credit. You can start building your business credit even before starting your business. This is crucial.


Free business credit report from D& B

Circuit City store going out of business

Circuit City store on Broadway,  Manhattan. The company declared Chapter 11 bankruptcy,   in late 2008.
Circuit City store on Broadway, Manhattan. The company declared Chapter 11 bankruptcy, in late 2008. | Source

Take first step to build business credit


Every thing starts with the first step. so take your first step to build your own business credit as you have taken your first step to build your personal credit. Take the first and then the second and so on. You will reach the goal of building your excellent business credit with a score of 75 plus.

Your first step is to establish your business as a separate entity. Build your business credit profile separate from your personal credit profile. Your business has to be structured as a corporation or a Limited Liability Company (LLC). LLC is most commonly adopted by small businesses.

Your second step is to prepare a well-written business plan. You have to include necessary financial details with all required sections. Include every possible data in your business plan. Show and define how you have developed your plans and come up with your figures. Obtain all necessary licenses and / or permits required to start and run your business, before proceeding further. Please keep in mind that your initial goal is to establish a viable business on paper with details at appropriate place.

Building business credit - Alternate way

Business credit report and reporting agencies


Your third step is to find out exact requirements of credit bureaus and lenders. You will always be in advantage if you know what's required of you. Accomplish those requirements and assess your credit yourself. It will be a great step in building your credit profile.

Your fourth step is to get a Federal Tax Identification number (FIN) also known as an Employer Identification Number (EIN) for business credit rating in America, the US. You can get it from the IRS.

Your fifth step is to start purchasing for your business. Your business needs your investment here. You may have individuals who will invest for you. Use that money to purchase from vendors and suppliers. Gradually shift from cash to credit purchase. This will let you establish your business credit.

Obtain five reporting vendor lines of credit for your business. Ensure that your business have at least five vendor lines of credit who report to the business credit agencies. There are over half a million vendors extending credit. However, only six thousands are reporting to the business credit agencies. There's no point in having vendor credit lines if they don't report to the national reporting agencies.

Your sixth step is to report your transactions to the credit bureaus. The major business credit bureaus in America, the US that compiles and provide copies of the reports are:

Dun & Bradstreet

Business Credit USA

Experian Business

Equifax Business

Ensure proper set up with all four or at least three business credit agencies. This is complicated but vital step.

Dun & Bradstreet is the biggest of all and provide you with Duns number which is permanent.

Build business credit with Experian business

Business Credit Rating and Credit Agencies

 Business credit rating is a review of transaction history of the business like a personal credit rating.

Lender uses credit rating to measure the level of financial risk of the business. They also use this to assess probability of defaulting on the loan.

When a business issues another business credit, it's referred to as trade credit. Trade or business credit is the largest source of lending in the world.

 Business credit bureaus gather Information about business credit transactions to create your business credit report using your business name and address. The business credit bureaus use this compiled data to generate a report about your business credit transactions.

Businesses have financial relationships with suppliers and lenders. Credit rating agencies gather information from them. Primary determining factor of a business credit report is promptness of the business in meeting its payment obligations. This includes paying suppliers, repaying loans and paying monthly leases and bills. They use these to create a rating for a business.

They also gather additional data from corporate finance reports, business filings, lawsuits filed against the business and judgments.  

Credit rating agencies also look in to the debt structure of the business. This includes type of loans i.e. secured and unsecured, amount of debt and repayment history. Financial resources, working capital, net worth and cash flow also gets significant consideration.

The fiscal information, however, is not considered in a vacuum. The business profile factors include equity, scope and size of the business, background of the promoters, number of employees and structure of the business. All these data are collected and calculated mathematically to come up with a credit rating.

In nut sell credit rating illustrates responsibility of a business in its payment procedures.

Normally lenders rely on your business credit report to determine your credit. They grant credit accordingly.

Business Loans For Bad Credit

Get bad credit business loans for your business and have your credit repaired. Merchant Advisers are here to help you find the bad credit loans at affordable rate.
Get bad credit business loans for your business and have your credit repaired. Merchant Advisers are here to help you find the bad credit loans at affordable rate. | Source

Build business credit profile


Your seventh step is to find companies willing to grant credit to your business without a personal credit check or guarantee.

N.B. Ensure that a company granting you business credit reports to the business credit bureau. Ensure that your business have at least three business credit cards not tied personally with you. There are over five hundred business credit cards. Only few of them issue a business card without using your social security number. You need to qualify for each business credit card. It will help build your business credit report and a financial foundation for your company.

Your eighth step is to obtain a reporting bank loan that is critical to your business credit.
Ensure that your business have loan from a bank that reports nationally. Only four hundred banks report nationally among five thousand business lending banks.

Your ninth step is to avail business funding programs for instant working capital.
Your business needs instant cash. There are many small business loan programs. Ensure that at least one of those is available to your business.

Your tenth step is to manage your debt. Make monthly payments to credit granters to keep your business credit profile active. Pay timely. It will positively affect your credit score.

Every business needs credit to start, maintain and expand. Start the necessary steps to build a business credit profile right now to obtain the best possible terms when you need it.


How to build business credit in 10 days

How do you like steps to build business credit?


Here I like to hear from you. Have you got relevant and sufficient information about building your business credit? Or you like to know more about building business credit?

Please feel free to ask questions and comment on this hub.

You can also feel free to e mail this hub to your family, friends, business partners and any one you like to do so. It may help them in building their business credit.

You can also share it in social networking sites or forums such as stumble upon, facebook, my space, orkut etc. You can book mark this hub to read it again.

Thanks and awaiting for your reply.

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Comments 24 comments

Ankur sarswat 6 years ago

Thanks,its too good steps to start business efficintly


Eric The SEO Firm Guy 6 years ago

Nice Hub. It is so important to people to be prepared and set so that the process go's much easier. This can be applied to anything in life. Nice Job.


JYOTI KOTHARI profile image

JYOTI KOTHARI 6 years ago from Jaipur Author

Hi Frank,

Thanks for your visit and comment on this article. I will feel pleasure if this hub will help small business owners.

Jyoti Kothari


Frank Crandell 6 years ago

Good tips for small business owners to obtain the necessary financing and credit they need. You are right, often new owners do not know how to get credit or maintain good credit for their company or service. This hub is very helpful.


JYOTI KOTHARI profile image

JYOTI KOTHARI 6 years ago from Jaipur Author

Hi garima,

I am glad to know that this article helped you. Thanks for your comment.

Thanks to Angelablogbox for commenting on this hub.

Jyoti Kothari


GARIMA 6 years ago

This is a wonderful hub. I am doing my CA and found this artile very helpful.

Uprated.

Garima


Angelasblogbox profile image

Angelasblogbox 6 years ago

Wow thanks for sharing.. this is very good


JYOTI KOTHARI profile image

JYOTI KOTHARI 6 years ago from Jaipur Author

Hi Praveen,

I have written this hub in American context but the general principals are similar everywhere. Procedures varry slightly from country to country.

Thanks for your comment.

Jyoti Kothari


Praveen 6 years ago

Hi,

This is a nice article. Every business person has to build business credit to run business successfully.

This hub contains tips about business credit in America.

Pls provide tips for Indians.


JYOTI KOTHARI profile image

JYOTI KOTHARI 6 years ago from Jaipur Author

Hi Multimastery,

Thanks for your comment and compliment. I appreciate your effort to bookmark this hub.

Thanks,

Jyoti Kothari


multimastery 6 years ago

Good job JYOTI very info-packed hub, will bookmark!


JYOTI KOTHARI profile image

JYOTI KOTHARI 6 years ago from Jaipur Author

Hi Sunny,

Core processes are similar every where but some differences in procedures. Please contact your CA or some other professional for the purpose.

Thanks,

Jyoti Kothari


Sunny 6 years ago

Hi,

I want to build business credit. I am in India, how can I?


JYOTI KOTHARI profile image

JYOTI KOTHARI 6 years ago from Jaipur Author

Hi Don Simkovich,

Thanks for your comment, suppliment, and compliment. Personal credit is gateway to business credit but one should not mix both.This can mess every thing.

Jyoti Kothari


Don Simkovich profile image

Don Simkovich 6 years ago from Pasadena, CA

These steps are well outlined and seem like they will work well in the U.S. as well as India. Some business credit is initially dependent on personal credit. For example, Home Depot can allow contractors to have a business line of credit but the amount they'll receive is based on their personal credit score. Also, I wrote a Hub about India as a growing market.


JYOTI KOTHARI profile image

JYOTI KOTHARI 6 years ago from Jaipur Author

Hi Lgali,

There are some ateps that can build business credit. I am in a business and have practical experience.

Thanks for your comment.

Jyoti Kothari


Lgali profile image

Lgali 6 years ago

Lot of good points to follow


JYOTI KOTHARI profile image

JYOTI KOTHARI 6 years ago from Jaipur Author

Hi Anjali,

Basic principle of building business credit is same everywhere. Only difference is procedure. Different culture and localities have different procedures.

Yes, this is written in business credit building perspective of America but these principals can be followed in India and anywhere in the world.

Thanks,

Jyoti Kothari


Anjali Kapadia 6 years ago

Hi Jyoti,

Again a fantastic hub.This time about business credit. Though it is written on American business credit system back ground it is useful for building business credit in India too.

Thanks for an excellent and informative hub.

Anjali


JYOTI KOTHARI profile image

JYOTI KOTHARI 6 years ago from Jaipur Author

Hi Navin,

Thanks for your comment and compliment. I will be glad if this help building business credit.

Will it help you to build your business credit?

Thanks,

Jyoti Kothari


Navin 6 years ago

Jyoti,

You have mentioned significant points about building business credit. Well described step by step process for building business credit.

Thanks for posting an excellent hub about business and finance.

It will surely help all business persons. This is the best in this niche.

Navin


Anshu 6 years ago

Hi Jyoti,

I am lucky to come across this article about Business credit. This is a fantastic article. It gives exhaustive details of business credit and personal credit.

Can you provide me with a check list? Can you help me in building my business credit?

I am ready to pay for that.

Thanks,

Anshu


JYOTI KOTHARI profile image

JYOTI KOTHARI 6 years ago from Jaipur Author

Hi Roychoudhuri,

Thanks for your comment and compliment on my hub Business credit.

I have shared what I learned.

Jyoti Kothari


H P Roychoudhury profile image

H P Roychoudhury 6 years ago from Guwahati, India

Hi Kothari,

It is a new incentive and right direction for a business to start. Thank you for sharing.

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