3 Important Steps when Building Business Credit

  • Create Business Viability
  • Register with the 3 Top Business Credit Reporting Agencies
  • Build a Well Rounded Credit Profile

How to Build Your Business Credit

As a seasoned business owner or startup entrepreneur you understand how important cash flow and obtaining it is. Businesses need more money than typical personal credit can provide and the inherent risk associated with using personal credit can be detrimental. To enjoy the riches that business credit can provide it’s time for you to get started today.

Preparation is Everything

Setting up your business is the first step. Although you can build business credi on any entity, including sole proprietorship, you should consider the risks and tax implications you may face. Consulting an Attorney or a CPA to discuss your options is a good idea and they can provide you with insight on which is the best way to get set up. To obtain a corporation or an LLC you can go online to the Department of State for the area your business is in. Make sure that when you register you also obtain your EIN number which is your businesses ID number for tax purposes. Make sure you have all the local and government licenses needed to operate your business legally.  

Now that you have all the legalities out of the way it’s time to start on your business viability.  When lenders, vendors, business grant providers, government and independent contract providers review your business, they want to see how credible your business entity is. They pull a business credit report and based on that and the information you provide them they put your business through a series of investigative tests. They want to make sure that your business actually has a location. If you are a home based business you need to get a business location, their are plenty of cooperative offices that will provide you a business address and other services for very little money each month. Secondly you must have a business number, not a cell number. There are many services out there that will provide you with a business number and even fax numbers. Many of them can be set up with various extensions that will make you look like a big company, even if you are a one person operation, and these services are really inexpensive. 

Now that you got all the hardware taken care of, it’s time to get your business noticed. Make sure your phone number is listed with 411, credit facilities use this as verification process, having your number easily found shows them that you are a real business. Don’t stop there! While your cruising the net, you will be able to find 100’s of places where you can list your business, the more places that you put your business information and contact information the more easily customers will be able to find you. Remember this is the best free advertising that you can get. Each one of these companies that offer free listings are fighting for the top spot. So they are going to do what they have to get their information ranked, and that’s good news for business exposure.  Make sure you keep all your business information confluent, do not use various forms of the business name, and keep your message the same. 

Build your website. The internet is the new yellow pages, its a way for customers and lenders to verify your business and learn more about what the business is about. The website should be professional looking and contain descriptive, content driven information about your products and services. Keep it uniformed to match the other information that you used when listing your company for 411. There are plenty of economical, do it your self websites around, make sure you invest in a widely used extension like .com or .net. Again, get your website listed with all the major search engines and free listing sites. More exposure the more you show up on searches the more customers. Nothing better than free advertising.

Last but not least, use a business email. Many of the web hosts provide email addresses, if not ZOHO will allow you to set up a business email using your website name (info@jjdeli.com). Using google, hotmail, or any other free email service is frowned upon in the business lending arena. Make sure to include the email on your website to make it easier for customers to contact you, even if you have a contact form, provide them the option. It also provides information validation for those reviewing your file and builds your viability.

Now it’s time to get yourself registered with the Business Credit Reporting Agencies.

Need a Website or a Free Viability Check to See if You Meet Lenders Guidelines?

Viability is the Essence of Your Business

Now it's Time To Get Registered and Start Building

Now that your set up to be noticed, it’s time to register your business with the 3 business credit reporting agencies. First go to Dun & Bradstreet and register to receive your Duns Number which is a unique nine digit number attached to your physical business location. Just go to the D & B website, find the section to apply for a Duns Number and follow the instructions

Once you receive your Duns Number now it’s time to start building. You will be able to access your file an provide updates, view your information , dispute inaccuracies and add vendors at the D& B Company Update Site, just follow the information on the website to gain access.

To add vendors, think of what you are paying now on a monthly basis. It could be as simple as a CRM or a vendor you buy inventory from. Check to see if they report to D & B, if they don’t submit their information to D & B. Here is the sticking point with that. D & B will call to verify the information of the company and your payment history, if their is no one there to provide that information it may take a while before they will be in contact with each other or even if they ever will. You may have to resubmit the information again. This is the start of your credit building process. There are companies who will provisde you credit, like Uline, an office supply company, and they report to D & B. But, don’t rush, establish with companies you already have first to get something in your file. When applying to other companies make sure you fill out the application completely and begin utilizing the available credit smartly and pay the bill before the due date.

Business Experian is a little bit more complicated. The first thing to do is go to the Biz Verify section of Experian on their website.You will have the ability to do a search by entering your basic business information, and see if they have any information about your business. If your business is listed hit the tradelines button and you will be able to view if their are any tradelines reporting. No matter if there are tradelines reporting or not, if you are listed proceed to pull a report, which you will have to pay a fee for. The reason to pull the report is twofold. First to verify that the information is correct the other reason is that Experian can provide a score based on one demographic element. This means having an address listed is a demographic element and they can provide you a very low score, simply based on that. Seems unfair, but that’s how Experian works, and their are reasons for that, but that’s for a different forum.

Business Equifax works very similar to Experian. Once at their website you can Find a Business and enter the information to see if you are listed. If it is, you need to pull a copy of the report to see what is on their and if the information is correct. If there are tradelines on either of the reports at least you will have a starting point on where to start and develop a process on obtaining more credit. Remember work slowly and ask vendors and credit facilities who they report to. Building a well rounded profile with each agency is important.

According to D & B regarding Vendors

“Some types of Companies do not respond to D & B’s requests for information within a reasonable time frame. D & B will make 6 attemptes to contact a company that has been selected to provide trade references, and will accept inbound references at any time. However, a customer may resubmit references at any time, after which D & B will make 6 more attempts.”

A Maintenance Program for Your Business Credit

Building Business Credit is a resourceful way to provide your business with the cash flow it needs to grow. When applying for credit remember to never provide your social security number, simply provide your EIN number. Your building a credible entity for your business allowing it to be looked at as a credit worthy establishment based on it’s own merits.  As you build your credit file you will have greater access to cash,  but use it cautiously.  Make sure you have a plan and follow that plan. It’s important that you make your payments on time so that you can build more and have access to even more cash. This makes your business even more valuable. Businesses that have established business credit and have the easy access to cash sell for much more money than those with poor or no business credit.

Incorporate a maintenance program to review your file on a regular basis to assure that the information is correct and up to date. The more information you can provide on the report, pertaining to your business, is the best way for lenders and vendors to understand your business. Make sure that your website and internet listings are updated and accurate and look for negative reviews and address them. Let’s face it, you can’t please everyone, so you are bound to have a negative review about your business, the secret is how you address them.

Your business bank account is another aspect of the approval process that very few business owners are aware of. Banks actually use a rating system for business accounts based on your businesses minimum maintained over a 3 month period. The rating system goes from 1 to 5, and they take it even further by rating each number with a low, medium or high based on the size of your business and expected cash flow. As a small business, maintaining a $10,000 minimum balance will provide you with a Low 5 rating which is an  acceptable approval rating for the automated and manual underwriting systems that lenders utilize. Make sure you don’t flag your account by bouncing checks and causing negative balances.  If you have auto pay on certain accounts, be sure their is money to cover the amount when the payment comes due. Banks and their security division will flag your account if these items are force paid. The creditor, based on the auto payment agreement, can gain payment even if there is no money in the account and the bank must comply, thus causing an overdraft and additional bank fees. Managing your business bank account should be part of your business credit maintenance program.

Find Out More About Maintaining and Monitoring Your Business Credit.