How To Build Business Credit Fast? (Most Efficient Methods)

Delina Chantel Yasmeh
Published by Delina Chantel Yasmeh | Author
Last updated: March 20, 2024
Methodology
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If you're a startup entrepreneur looking for ways to build your business credit quickly, you've come to the right place.

Working with our qualified business experts with twelve years of experience in the startup industry, we spent three weeks researching the fundamentals of business credit and how to boost it as fast as possible.

Continue reading to understand how to build business credit in no time and the benefits of having a good score.

Quick Summary

  • To build business credit fast, establish a solid business foundation, register your business structure, obtain a D-U-N-S number, and consistently manage credit transactions.
  • Regular monitoring of your business credit reports is crucial to ensure accuracy and track improvement.
  • According to the U.S. Small Business Administration, approximately 45% of small businesses fail within the first five years, often due to poor financial management, underscoring the importance of building strong business credit.
  • I iften rem find my clients that establishing and maintaining good business credit is fundamental for securing better financing options and enhancing a company's reputation.


What Is Business Credit?

Holding both credit card and phone and trying to get a business credit fast

Business credit is a key indicator of your company's creditworthiness in the eyes of banks, financial firms, suppliers, consumers, and partners.

Therefore, having a strong business credit score can assist your company in obtaining new loans, opening (or expanding) trade lines of credit with your vendors and suppliers, or securing a major business client.

The types of business credit include:

  • Business credit card
  • Line credit
  • Vendor credit
  • Term loan
  • Service credit

Business credit reports may include basic details about the business, SIC, and NAICS codes, the firm's history, industry risk, operation-related information, verdict and lien information, and how the company has paid its bills.

Drawing from experience, access to credit or cash is necessary for a firm to succeed over the long run. Thus, A corporation can benefit greatly from a balanced and favorable business credit profile.

For instance, you can request a cash flow loan if your company needs extra working capital to maintain operations. Lenders will review your business credit as a source of information on your company's financial health when you apply for this loan.

"Business credit separates a company's financial obligations and characteristics from those of its owner, enabling the company to establish its own creditworthiness rating."

- Jon Morgan, CEO, Co-Founder & Editor-in-Chief of Venture Smarter

How To Build Business Credit Fast?

Woman with three business credit card

1. Build Your Business Foundation

It is beneficial to correctly build the foundation of your firm to establish business credit. If your company is young, take the time to put it up so that it presents a professional image to customers and lenders.

Focus on building a strong brand, obtain a business phone number, email address, a company P.O. Box address, and a Tax ID.

2. Register Your Business Structure

Registering business structure while holding a document

Business structures such as LLCs, corporations, and partnerships must be formally registered with their state.

If your company was established in another state, you might also need to register it as a foreign corporation in the state where you conduct business.

You can register a Doing Business As or trade business name with your state if you are operating under a different name than your legal entity name.

I always advise my clients to check the laws in their state to verify if they need any licenses and insurance before starting operations.

3. Obtain a D-U-N-S Number

A DUNS or a Data Universal Number System is a nine-digit identifying code linked to a company's credit history [1]. According to Dun & Bradstreet, over 50 million businesses worldwide have a DUNS number, reflecting its global use as a standard business identifier.

The DUNS system is used globally to support firms in establishing credit. It is a database for crucial corporate data, such as company name, address, phone number, financial health indicators, and business structure.

The DUNS number is linked to information about your company's credit standing, legal actions, past vendor payments, and other open data [2].

A DUNS number is necessary for your small enterprise to establish credibility and pique the interest of serious investors. 

Your suppliers, lenders, and investors can access the DUNS number to review your company credit report before conducting business with you.

4. Open a Business Credit Card

Opening a business credit card on her laptop

A business credit card provides larger credit limits than a consumer card and separates your business and personal accounts, keeping documents organized for tax season.

In addition to the personal information required for any credit card application, you must confirm your company's existence.

Other details that you must provide on the application form include:

  • Your company's name.
  • Registered address.
  • Yearly income.
  • Number of workers.
  • Expected expenditure demands.
  • An employer I.D. number.

Note that all company credit cards need a personal guarantee. For the business owner, this means that you are personally liable for the amount charged to the card.

And, even if you use a business card, then you pay late or skip a payment, the bad information might be reflected on your credit reports, lowering your credit score.

Read our article and learn how to get a business credit card for an LLC.

5. Establish Credit With Reputable Suppliers

Talking to a supplier giving credit card

Reputable suppliers sometimes provide trade credit, allowing you to pay many days or weeks after receiving the merchandise.

If your supplier reports payments to a business credit agency, this account-payable connection can help build your firm's credit score.

It would be best to prioritize establishing trade lines with any minor vendor, such as your furniture or food supply distributor.

Throughout my consultancy, I have learned that if your merchants do not report to a credit bureau, you can add them as a trade reference to your business bank account.

6. Use the Credit Card

Another strategy to develop business credit is to focus on credit utilization and use your business credit cards as much as possible.

Remember that your credit limit may be limited at first, especially if your company is new. But as you use it over time, your credit limit will rise as you improve your credit score.

7. Pay Early

Paying early in the bank

To start building business credit quickly, you should consider paying early or on time. During credit score reviews, your payment history, especially the Days Beyond Terms (DBT), speaks volumes about your business.

DBT is a word used in credit reports to denote how many days after the due date a payment was made. For instance, if your vendor's terms are "net-20," and you pay on day 23, the account will be shown as 3 DBT.

The three days late payments will negatively impact your company credit score.

To counter all these, you should pay on time or early to increase your company credit score faster.

8. Monitor Your Business Credit Reports

Tracking the history of your business credit file is a great way to monitor your progress and catch errors. If you discover a mistake, register a dispute with the credit bureau that reported the inaccuracy.

If your accounts aren't improving your ratings, open new LLC business bank accounts and add new credit references.

Some third-party business credit reporting agencies notify businesses when their credit ratings change; this is a fantastic way to monitor your credit score throughout the year.

Another method is registering with the major business credit bureaus and independently verifying with each company's credit reporting organization.

Benefits of Having Good Business Credit

Paying using business credit card

Having good business credit offers different benefits for your limited liability company, including the following:

  • Finance Availability

A strong credit score might make it simpler for a company to receive finance, such as loans or credit lines. Companies having a great credit history are more likely to be extended credit by lenders and investors.

  • Improved Financial Terms

A strong credit score can assist a company in obtaining more favorable financial arrangements, such as reduced business loan interest rates or longer payback periods.

  • Improve Your Business Insurance Rates

A solid business credit can help you get better corporate insurance rates and offer your company additional lending possibilities. Good credit is frequently associated with fewer claims, implying a reduced level of risk for the insurer.

If your business credit rating is strong, you may be able to get a lower rate.

  • Maintain Your Competitiveness

Other companies desire to work with someone who has a strong credit score.

This guarantees you pay on time and have enough cash to deal with emergencies. This allows you to outperform competitors who may not have a solid business and personal credit report.

  • Separate Your Business and Personal Finances

Without company credit, you'll likely have to rely on your personal credit history to acquire funding for business expenses. This can include utilizing personal credit cards and loans to meet corporate costs.

This not only makes tracking corporate spending more difficult, but it also weakens legal safeguards for businesses and LLCs.

FAQs

How Do I Get Large Amounts of Business Credit?

You get large amounts of business credit by utilizing the credit card frequently and paying the debt early and as often.

What's Included in a Business Credit Report?

The general business information, business credit history, and account details are included in a business credit report.

How Do I Know How Much Credit My Business Has?

To know how much credit your business has, you can contact third-party business credit agencies who charge a fee for you to view your business credit score.

 


References: 

  1. https://www.dnb.co.uk/duns-number.html
  2. https://www.irs.gov/pub/irs-utl/duns_num_guide.pdf

About The Author

Author
Delina Chantel Yasmeh, J.D./Tax LL.M, specializes in Mergers and Acquisitions at Deloitte and PwC, managing billion-dollar transactions. Educated in Accountancy at California State University and holding advanced degrees from Loyola Law School, she is highly skilled in tax law. Delina also dedicates time to pro bono work for women and children.
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Growth & Transition Advisor
LJ Viveros has 40 years of experience in founding and scaling businesses, including a significant sale to Logitech. He has led Market Solutions LLC since 1999, focusing on strategic transitions for global brands. A graduate of Saint Mary’s College in Communications, LJ is also a distinguished Matsushita Executive alumnus.
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