How do I build business credit for my startup?
I'm a new entrepreneur with a startup that has recently started generating revenue, and I'm now facing the dual challenge of managing my growing finances while also building a strong business credit profile. I’ve set up my business structure and obtained my EIN, but I’m not entirely sure about the next steps to establish credit that will help me secure financing on better terms. In addition to managing multiple charges across different accounts, I need guidance on how to systematically build business credit. Should I obtain a DUNS number, open dedicated business bank accounts and credit cards, and set up trade lines with vendors? I'm looking for practical advice and strategies to streamline my financial management while simultaneously boosting my startup's creditworthiness for future growth.
1 Answers
Building business credit is an essential step for a new company to secure financing on favorable terms. Start by formally registering your business (LLC, corporation, etc.) and obtaining an Employer Identification Number (EIN) from the IRS, as these create a legal identity separate from your personal credit. Next, get a DUNS number (from Dun & Bradstreet) – this is a unique identifier used by credit bureaus to track your business credit history.
Once your business is registered and identifiable, open accounts that report to business credit bureaus: for example, open a business bank account and a business credit card in your company’s name. Many credit card issuers and vendors report payment activity to commercial credit agencies. You can also establish trade lines with suppliers – ask vendors if they offer payment terms and report your payments. Trade lines (like a Net-30 account where you buy now and pay in 30 days) build credit if you pay on time.
The crucial factor in building strong business credit is payment history. Ensure you pay all bills, credit card statements, and supplier invoices on time or early. Consistent on-time payments will gradually improve your business credit score. Over time, consider diversifying your credit by taking out a small business loan or line of credit and repaying it responsibly to further boost your profile.
Keep business debt at manageable levels – use credit but don’t max it – and monitor your business credit reports periodically for accuracy. According to experts, following these steps – register your business properly, get a DUNS number, and open credit lines in the business’s name – is the foundation of building business credit. With patience and good financial habits, your startup will develop a credit history that opens doors to larger financing and better trade terms with suppliers.