How to build and get business credit

Establishing a strong business credit score is key to your company’s health, making sure it survives and thrives into the future. Good credit can make your organization more attractive to investors, help you secure financing from banks more easily, and give you leverage in negotiations.

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In this article, we’ll explain some simple and effective ways to build business credit quickly, whether you’re a new entrepreneur or have been in business for years.

How to build business credit

An established business credit report can help you get higher credit approvals, better interest rates, and better repayment terms on business lines of credit and loans.

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Here are five steps for establishing business credit as a small business owner:

1. Formalize your business entity and get an EIN

The first step to establishing your business credit is to form a legal entity, such as a limited liability company (LLC) or corporation. This separates your personal credit history and finances from your business finances and gives you limited liability protection.

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Next, you’ll want to get an Employer Identification Number (EIN). This is a business tax ID issued by the IRS that allows you to file your business taxes and open a business bank account. Additionally, when applying for business credit cards, an EIN is used to report your credit activity to business credit bureaus like Equifax and Experian.

2. Apply for business credit with Dun & Bradstreet

A DUNS number, issued by Dun & Bradstreet, is a unique identifier that helps build your business credit report. Many loan providers and potential partners, especially large suppliers or government agencies, require a DUNS number to verify your business's creditworthiness. 

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It also helps establish your business in Dun & Bradstreet’s Paydex score system, which lenders use to evaluate your payment history. You can apply for a DUNS number for free on the Dun & Bradstreet website, and it’s a critical step toward building credit with major business credit reporting agencies.

3. Open a business bank account

A dedicated business bank account is essential for separating personal and business finances. It helps track your business’s income and expenses more accurately and allows you to keep your personal credit separate from business liabilities. 

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Opening a dedicated business checking account can protect your personal credit score and finances from any legal or financial issues arising from your business. To open a business bank account, you'll have to provide your business's EIN, legal documents, and other information to verify your business's identity.

4. Open net-30 accounts or establish tradelines with vendors

Building business credit can start by establishing credit accounts with vendors and suppliers, often referred to as tradelines. Request net-30 payment terms, which allow you to pay within 30 days instead of upfront. 

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Consistently paying these accounts on time demonstrates financial responsibility, which helps boost your business credit score. As your business credit strengthens, you may qualify for more favorable terms, such as net-60 or net-90, and even larger credit limits.

5. Use a business credit card responsibly

Opening a business credit card is an effective way to build business credit. Make sure the card reports to business credit bureaus using your EIN. To maximize the credit-building benefits, use the card regularly but keep your credit utilization low, ideally below 30% of your limit. 

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Most importantly, always make on-time payments to avoid interest and maintain a strong payment history. Responsible usage will help strengthen your business credit file over time, improving your eligibility for higher credit limits and better terms.

Bonus step: Keep your accounts open

Maintaining long-standing business credit accounts helps build a good business credit score. Business credit bureaus, like Dun & Bradstreet and Experian, consider the length of your credit history when calculating your score. The longer your accounts remain open and in good standing, the more it demonstrates your business’s creditworthiness.

How long do you have to be in business before you can open a business credit card?

You can apply for a business credit card as soon as your business is legally established, even if it’s newly formed. Many issuers allow startups and new businesses to qualify, especially if the applicant has a strong personal credit score. Typically, having a formal business structure such as an LLC or sole proprietorship, and providing either an Employer Identification Number (EIN) or a Social Security Number (SSN), is required.

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If your business is new and hasn't established credit yet, issuers will primarily assess your personal credit and consider projected revenue or early financials. Having at least a few months of business operations can improve your chances of approval, but even with limited business history, a solid personal credit profile can help you access business credit cards quickly.

Benefits of having good business credit

Better financing opportunities

A strong business credit profile improves your chances of being approved for financing because lenders want assurance that you can repay them on time. Lenders generally require a credit score of around 600 to approve you for a small business loan, but some lenders may approve a loan if your score is as low as 500. If you're applying through a bank, this requirement could be closer to 700. A higher score can also yield better terms.

Easier access to capital

When potential investors such as venture capitalists and angel investors see that your business has good credit, they're far more likely to invest. A good credit rating will also open up other funding options, like traditional bank loans and lines of credit or alternative online lenders. This flexibility can be beneficial during uncertain economic times.

Improved cash flow

Good credit will help you secure financing quickly and manage cash flow better, as it can give your business an influx of cash during economic downturns. This is especially important if your business needs to purchase inventory or keep up with other business expenses to meet growing customer demand.

Increased negotiating power

A strong business credit score can give you leverage when negotiating contracts and pricing. This can be especially helpful if you’re in an industry where you negotiate contracts on an ongoing basis, such as professional services.

What does a healthy business credit portfolio look like?

A healthy business credit profile is a reflection of your company's financial reliability and creditworthiness. It shows lenders, suppliers, and investors that your business can manage its financial obligations effectively. Here's what a healthy business credit profile typically looks like:

1. Strong payment history: Timely payments are the most crucial factor in maintaining a solid business credit score. A consistent record of paying vendors, suppliers, and lenders on or before due dates is essential. Late payments can significantly lower your score and impact your business credit history.
2. Low credit utilization: Ideally, your business should be using less than 30% of its available credit. A low credit utilization ratio shows that your business is not over-reliant on credit and can manage its cash flow well.
3. Diverse credit accounts: A healthy profile often includes a variety of credit accounts, such as credit cards, business loans, and lines of credit. This demonstrates your ability to manage different types of financing responsibly.
4. No judgements or liens: Legal actions such as judgments, liens, and bankruptcy filings under your business’s name can harm its credit score. If your business has unpaid taxes or debt, it can lead to a lien, which gives creditors the legal right to claim your property to recover what is owed. Unsettled debts may also lead to a court judgment, requiring your business to pay the outstanding amounts.
5. Minimal credit inquiries: Too many credit inquiries in a short time can be seen as a sign of financial instability. A healthy business credit profile will have few hard inquiries, indicating the business is not constantly seeking new lines of credit.

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A healthy business credit profile increases your chances of securing financing with favorable terms, gives you access to better trade agreements, and enhances your overall business reputation.

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How long does it take to build business credit?

It can take up to three years for a business to build a strong credit score. The timeline depends on several factors, including how quickly you establish credit accounts, how consistently you make payments, and how often your vendors and creditors report your activity to business credit bureaus.

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During the first year, you may start seeing small improvements in your business credit score if you open accounts, pay bills on time, and manage credit responsibly. However, achieving a solid credit profile that qualifies your business for more significant loans and favorable terms usually takes two to three years of diligent financial management. Maintaining a positive credit history over time, with a mix of credit types (like trade credit, loans, and credit cards), helps build a stronger profile.

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Build business credit and control spending with Ramp‍

The Ramp Business Credit Card reports to the major business credit bureaus, helping you build business credit. Unlike traditional credit cards, it also comes with built-in expense management software that allows you to keep tight controls on spending, receipt tracking, and monthly payments. 

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There are no annual fees, interest fees, or foreign transaction fees. To apply for Ramp, all you need is a registered business with at least $25,000 in a U.S. business bank account.

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Try a demo to see if Ramp is right for your business.