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Everything You Need to Know About Business Credit

As a small business owner, you really are your business, so it’s probably never occurred to you to separate your business and personal credit histories — but that’s exactly what you should do. 

Why Building Your Business Credit Is Important

One of the best reasons to divide your business and personal credit histories is that you can prevent problems with one from affecting the other. A few missteps with your personal credit cards, for example, won’t negatively reflect on your business credit.

However, separating your business credit from your personal credit has even bigger benefits. When your business has good credit, it can more easily qualify for loans, credit cards, and financing from investors. Access to that kind of money when you need it is key to your company’s survival since insufficient financing is the second-most common reason that small businesses fail.

How to Establish Business Credit Quickly 

According to the folks at UTurn Management, the process of obtaining business credit feels overwhelming to a lot of small business owners simply because it’s so unfamiliar. They simply have no idea how to get started, which is why many new business owners come to them for guidance. 

The fastest path to establishing your business credit involves the following steps:

  • Form a business entity: Because there’s no legal distinction between a sole proprietor and their business, you can’t build business credit until you register as a limited liability company or incorporate it.
  • Obtain an Employer Identification Number (EIN): An EIN acts like an identifier for your business and connects it to its credit accounts, much in the same way that your Social Security number connects you to your personal credit history.
  • Open a bank account for your business: This is a legal requirement when you incorporate your business, and it makes record-keeping easier.
  • Get a phone line for your business: Make sure that your dedicated business line is listed in public directories to help strengthen your credibility.
  • Register for a DUNS number: Experian and Equifax both maintain business credit scores, but Dun & Bradstreet is arguably the most prominent credit reporting bureau for businesses. It requires companies to register for a separate identifier.
  • Open a few business lines of credits: Whether you just obtain a business credit card, take out a small loan or establish a lease in your company’s name, it helps build your business credit history.

The sooner you establish your business credit, the stronger it will be, and that ultimately saves you money and makes it easier to follow your dreams.