Understanding Business Credit: A Complete Guide

What is Business Credit?

Business credit is a measure of your company's ability to repay debts, separate from your personal credit. It's reported by business credit bureaus and used by lenders, suppliers, and partners to evaluate your business.

Why Business Credit Matters

Financing Benefits

• ●Access to larger loan amounts
• ●Better interest rates and terms
• ●Less reliance on personal guarantees
• ●Faster approvals with established history

Operational Benefits

• ●Better supplier payment terms (net-30, 60, 90)
• ●Lower insurance premiums
• ●More attractive to potential partners
• ●Easier to win contracts

Business Credit vs Personal Credit

The Business Credit Bureaus

Dun & Bradstreet (D&B)

PAYDEX Score: 0-100

• ●80+ = Good
• ●Measures payment performance
• ●Based on trade references

Experian Business

Intelliscore Plus: 1-100

• ●76+ = Low risk
• ●Combines payment data with public records
• ●Predicts likelihood of serious delinquency

Equifax Business

Business Credit Risk Score: 101-992

• ●Lower = better risk
• ●Includes payment trends
• ●Incorporates public record data

Building Business Credit: Step-by-Step

Foundation (Weeks 1-2)

1. ●

   Incorporate properly

   • ●Form LLC or Corporation
   • ●Avoid sole proprietorship
2. ●

   Get your EIN

   • ●Apply at IRS.gov (free)
   • ●Immediate confirmation
3. ●

   Open business banking

   • ●Dedicated business account
   • ●Keep personal funds separate
4. ●

   Get business phone number

   • ●Listed under business name
   • ●Used for verification
5. ●

   Establish business address

   • ●Virtual office acceptable
   • ●Not a PO Box

Building (Months 1-6)

1. ●

   Register with D&B

   • ●Get DUNS number (free)
   • ●Update company information
2. ●

   Open trade accounts Vendors that report to bureaus:

   • ●Uline (office/shipping supplies)
   • ●Grainger (industrial supplies)
   • ●Quill (office supplies)
   • ●Summa Office Supplies
3. ●

   Get business credit cards

   • ●Start with secured if needed
   • ●Choose cards that report to business bureaus
   • ●Keep utilization under 30%
4. ●

   Pay early or on time

   • ●Early payments boost PAYDEX
   • ●Never miss a payment

Growing (Months 6-24)

1. ●

   Add more trade lines

   • ●Aim for 5+ reporting accounts
   • ●Diversify types of credit
2. ●

   Increase credit limits

   • ●Request increases every 6 months
   • ●Shows growing creditworthiness
3. ●

   Monitor your reports

   • ●Check quarterly for errors
   • ●Dispute inaccuracies promptly
4. ●

   Consider small business loan

   • ●Builds loan payment history
   • ●Demonstrates borrowing capacity

Common Mistakes to Avoid

When Building

• ●❌ Missing payments (devastating to scores)
• ●❌ High credit utilization
• ●❌ Too many applications at once
• ●❌ Not monitoring reports

Structural Issues

• ●❌ Mixing personal and business finances
• ●❌ Operating as sole proprietor
• ●❌ Inconsistent business name usage
• ●❌ Using home address for business

Monitoring Your Business Credit

Free Options

• ●Nav.com (free basic monitoring)
• ●D&B (free DUNS lookup)
• ●Credit.net (limited free access)

Paid Services

• ●Dun & Bradstreet CreditSignal
• ●Experian Business Credit Advantage
• ●Equifax Business Credit Monitor

Timeline Expectations

Using Business Credit for Financing

Once established, your business credit can help you:

1. ●Qualify for better terms on loans
2. ●Reduce personal guarantee requirements
3. ●Access larger credit lines
4. ●Get vendor financing more easily

Conclusion

Building business credit takes time but provides significant benefits. Start with the foundation, consistently pay early, and monitor your progress. In 12-24 months, you'll have a valuable asset that makes financing easier and cheaper.