How Business Credit Works - SOUTHSTATE FINANCIAL

How to Establish Business Credit
Establishing business credit is a pretty straightforward process of following steps to create a business profile with federal and state agencies where you plan to do business, and with the business credit bureaus, such as Dun & Bradstreet, in order to prove your business entity exists. Accomplishing these tasks early on, when starting your business, will help you to be in a better position if and when you find yourself needing to request external funding, applying for business insurance, bidding on certain contracts, or establishing relationships with vendors and suppliers.

1. Establish Your Business as a Separate Entity
Ideally, business owners think about credit before they start a company. That’s because a business’s structure can affect how lenders or potential business partners judge its credit outlook. Corporations and Limited Liability Corporations (LLCs) exist as independent entities and, generally speaking, are blank slates when it comes to establishing initial business credit scores and ratings. This separation of owner and enterprise is often the best approach when looking to establish your business credit.
On the other hand, sole proprietors may find that lenders and potential business partners may prefer to rely on their personal credit score to help assess the business. Because of this both past and future oversights on your personal accounts could affect financing or contracting opportunities for your company.

2. Register for a Dun & Bradstreet D-U-N-S® Number
The D-U-N-S Number is a unique identifier for your business, and it’s available for free from Dun & Bradstreet. This will be the number some lenders and potential business partners use to check your business’s credit profile, so you want to have it available before applying for a loan.

3. Get an Employer Identification Number From the IRS
An Employer Identification Number (EIN) is required to file your company’s taxes. Banks and potential business partners can also request it when you fill out paperwork. You can apply for a free EIN External Website. Opens New Window on the IRS website.

4. Open a Bank Account for Your Business
In the interest of establishing your business’s independent identity, you’ll want to use a business bank account for company purposes. A business account can also help you build a track record with the bank. If and when you do apply for credit, you’ll come to them as an existing customer. Note that a business bank account is different than a business credit card. Your company’s bank account should be in the business’s name. Many business credit cards still hold the individual cardholder responsible for debts, so these transactions may not impact your business’s credit scores and ratings.