How to Establish Business Credit

Two-thirds of new businesses survive at least two years, and 44% percent survive at least four years. Thirty-three percent of self-made millionaires are entrepreneurs. Now is a great time for entrepreneurs to start a business.

It is important to establish business credit when you are running a business because when you apply for business loans or credit, companies will look at your personal credit and your business credit profile to determine: if you will be approved, the amount approved, the terms of the approval and if you will have to give a personal guarantee. It takes about 6-9 months to establish business credit and up to 2 years to establish good to excellent business credit.

When you separate your business and personal credit it makes it easier to file your taxes. Opening a business credit card account provides a professional image for your company and ensures other businesses perceive you as a legitimate company.

There are only a few payments options available when making business transactions such as credit card, PayPal, debit card and checks. Business credit cards provide higher limits and higher rewards than personal credit cards.

Before applying for business credit and to ensure you are approved you will need: two years of financial statements and tax returns, one bank reference, and a good relationship with your local bank. You can do this by opening a CD for 3-6 months. Once it matures take the money out and open a small personal loan. Pay the loan back on time or before the loan end date. This helps establish a relationship with the bank. Now the bank will be more willing to approve you for a business loan or business credit card.

Here are 6 tips to establish business credit:
1. Open a business credit card or trade line with your business tax id to keep your personal credit and business credit separate such as Staples, Office Depot, UPS, FedEx, Office Max, Exxon, etc. You will need 5 trade references reporting to Dunn & Bradstreet.

2. You can apply for a business credit card with your SSN. However, if you make a late payment your personal credit is damaged.

3. Establish a business profile with Dunn & Bradstreet and get a Paydex score (business credit score).

4. Get a credit card with no personal guarantee. This ensures that if the business fails you are not responsible for any debt owed.

5. Get a secured business credit card.

6. Setup business credit reports with at least 3 agencies (Experian, Equifax, Dunn & Bradstreet, TransUnion, etc.)