How Do Businesses Establish Credit?

How do businesses build credit

Find Yourself Wondering ‘How Do Businesses Establish Credit?’

As a business owner, there are many parts of the process that you will be concerned with. Things such as finding customers and clients, and what your business will look like and sound like, for example. However, one of the most important things to concern oneself with should be regarding the business’ finances and credit. And, if you weren’t already aware, your business credit is best reserved being entirely separate from personal credit. Even if your business is new and operating from personal funds presently, it’s never too late to prepare for the future. Instead of wondering ‘how do businesses establish credit?’, arm yourself with this knowledge.

Steps To Take After Incorporating Your Business

After your business is set up, you will need to get a federal tax identification number (EIN). This number is best thought of as your business’ social security number. The EIN is also required on federal tax filings, and to proceed with opening up a bank account. Next, you’ll want to go ahead and open that business bank account in your business’ legal name. Be sure that you pay bills and any other transactions of the business through that account. The last main thing to do is apply for a business credit card. Obtain at least one business credit card that is not linked to your personal accounts. Pick a business credit card company that reports to the credit reporting agencies. Finally, ensure to pay the credit card bill from your business checking account.

More Steps To Take For Even Better Business Credit

There are a few more important steps that will ensure your business credit is built correctly and quickly.

  1. Open business credit files. Open a business credit file with each of the three main business reporting agencies: Experian, Equifax and TransUnion.
  2. Establish lines of credit with at least 5 vendors and suppliers. Working with them creates credit for your company. Request they report your payment history to the credit reporting agencies to keep track of good standings.
  3. Pay your bills on time. This should be given! Similar to your personal credit, late payments negatively impact your business credit so ensure they don’t happen.
  4. Get a business phone line. Having a separate number for your business and in your business’ legal name is best advised. Once obtained, list it in the local and Google directory so it can be found by customers.

How Long It Takes To Establish Business Credit

At KAB Credit Services, we act quickly in helping businesses build their business credit and qualify for the loans they deserve. Our services can typically yield results in 30 days. In this time, we help you get business credit for your company without checking your personal credit or SSN.

Interpreting Your Business Credit Score

Similar to your personal credit scores, your business credit scores provide a good look at your reputation. It’s a quick view of risk potential based on where the score falls on the scale. In essence, the higher score you boast, the lower risk you present. The main difference lies in the actual numbers used on the two credit scales. Personal credit lies between 300 – 850, whereas business credit scores use a scale that ranges from 0 to 100. When you proactively manage your business credit score, great things happen. From ensuring your vendors are reporting your payment history, and monitor your business credit report, your score will steadily grow.

How To Understand Your Business Credit Report

Once you’re aware of how do businesses establish credit, monitoring is very important. The best way to do that is by checking your business credit report directly. If you’re unaware of how to check each of the portions of a business credit report, Experian has provided a sample one for review. In each of the sections, there are highlighted portions and clickable links for further information and understanding. Take a look here: Experian sample business credit report. In this sample document, you will take a look at:

  • Company Background
    • Key Facts
    • Previously Known As
    • File Established
    • Experian BIN
    • Family Linkage
  • Business Credit Score
    • Key Score Factors
    • Recommended Action
  • Financial Stability Risk Rating
  • Credit Summary
    • Days Beyond Terms (DBT)
    • Predicted DBT
    • Payment Trend Indicator
    • Balance
    • Business Inquiries
    • Uniform Commercial Code (UCC) Filings
    • Bankruptcies
  • Payment Trend Summary
  • Monthly and Quarterly payment Summaries
  • Collections Filings Detail
  • Collections Summary
  • Commercial Banking, Insurance, Leasing
  • Judgment Filings
  • Tax Lien Filings

Trust The Business Finance Suite From KAB Credit Services

At KAB Credit Services, our Business Finance Suite is part of our Business Credit Builder Membership. This service is useful for both new and existing small business owners. It helps owners monitor their business and keep track of their financial information through various reporting tools. A quick look at the services can be seen in the video below:

Our Business Finance Suite helps you build credit for your business through your EIN number instead of your social security number. In doing so, you do not need personal credit checks or personal guarantee for approval. This is the most beneficial for when you are just starting your company, when you may not have any collateral or cashflow.

Who We Are – KAB Credit Services

At KAB Credit Services, our mission is to help entrepreneurs obtain the capital and credit they need to fuel their dreams. Whether you are just starting your business or looking for millions in capital to expand, we have solutions that can help you fund your endeavors. KAB Credit Services is dedicated to helping you get business credit and financing for your company. Call us today to schedule a FREE consultation. Do you still have questions or comments? Send us a message.