By: Armando Pantoja (TallGuyTycoon)
Tue Nov 30 | 5 minute read

How to Build Business Credit in 5 Steps

Business owners have access to another line of credit called business credit. This is very beneficial because you can obtain loans and credit without have to put your own credit score at risk.

If you’ve been denied a small-business loan, it is more than likely because you have bad personal or business credit. Almost half of small-business borrowers who get turned down because of their personal credit scores. This is where business credit comes in.

A strong business credit profile doesn’t just help you get loans; it also helps you grow your business by attracting new clients and customers. Unlike with personal credit reports, anyone — including potential customers, partners and suppliers — will look at your business credit report. Government contracts are often given to people with high business credit scores. Its not just about credit and loans, a high credit score shows you are an honorable and credible person to do business with

It is very easy to build business credit, if you know what you are doing. Here are the 5 steps:

1. Get a Dun & Bradstreet profile and number

There are several credit bureaus that collect data and create business credit scores, including Dun & Bradstreet, Experian and Equifax. But compared with personal credit scores, which follow the standards set by Fair Isaac Corp. to produce a standard FICO score, business credit scores are much less streamlined. Each business credit bureau has a different formula for calculating scores, and different lenders report different types of data, says Gavin Harding, a senior business consultant at Experian.

There is an app that does all this for you called Nav. Nav is the only free service that shows business owners how to improve their business’s financial health by helping them understand credit

Download Nav and get your business credit started.

2. Establish trade lines with your suppliers

When you buy supplies or other materials from vendors, those purchases can help build your business credit. Many suppliers extend trade credit, which means they will let you to pay days or weeks after they ship you the inventory. Your business credit score will explode as long as you stick to the terms and pay on time.

3. Make payments to creditors on time or early

Although each credit bureau uses different methods of creating business credit scores, every one of them will consider your history of paying on time in full. To build towards a good score, make sure your payments are early (If you can). Dun & Bradstreet assigns perfect scores to those companies who pay early.

Nav helps you Monitor Cash flow alerts & insights

4. Borrow from lenders that report to credit bureaus

Small business loans will boost your business credit if you make all your payments on time and the bank or lender reports to a business credit bureau. Be careful because not all lenders do.

Banks typically report to credit bureaus, but if you have bad credit, you probably won’t qualify for a bank loan.

5. Keep your public records clean

A judgment is a court ruling, so if you get sued and lose or anything like that, it will have a negative affect on your credit score. 

These negative marks on your business credit report can destroy your business credit score. Bankruptcies, for example, stay on your Experian credit score for almost 10 years; tax liens, judgments and collections remain for almost seven years.

This site is a Paid Affiliate/partner of Nav.

This post is the opinion and/or actions of Armando Pantoja and/or the author only. It is NOT financial advice. All investing and trading in the securities market involves risk. Any decisions to place trades in the financial markets, including trading in stock or options or other financial instruments, is a personal decision that should only be made after thorough research, including a personal risk and financial assessment, and the engagement of professional assistance to the extend you believe necessary.