When it comes to running a small business, there are a lot of factors that come into play, and success is often determined by an owner’s ability to balance those factors despite the hurdles and road blocks that threaten growth. And while there are varying issues or concerns that could creep up, few are quite as significant or, in some cases, detrimental, as the almighty business credit score.

Your business credit score, when properly nurtured can open up a world of possibility, but it can also put a quick stop to everything, from securing funds to finance payroll during a slow period to purchasing or repairing much needed equipment. That’s particularly true when your credit score is poor, thin, or essentially non-existent. This issue leads many business owners to ask, “How can I quickly build my business credit?” 

A race to great business credit often requires the endurance and stamina of a tortoise, making it a slow and steady journey, but that doesn’t mean you can’t start making progress today. Here’s how:

1. Choose the Right Business Structure

Choosing the right business structure involves assessing your company’s size, ownership preferences, liability considerations, and taxation implications. Sole proprietorships are simple but expose personal assets to business liabilities, while partnerships distribute responsibilities but involve shared decision-making. 

Limited liability companies (LLCs) offer liability protection and flexible taxation, while corporations provide strong liability protection and structured ownership, albeit with more formalities. Consider your growth plans, the number of owners, risk tolerance, and tax preferences to determine the optimal structure that aligns with your business goals and safeguards your personal and financial interests.

2. Check Business Credit Agency Databases

Business credit agencies act as the gate keepers for your score, compiling the data that is used to determine your score and providing that score to you or potential lenders, vendors, etc.  For that reason, it’s a good idea to first check with agencies like Dun & Bradstreet (D&B) or Experian to see if your business is already in the database.

To do that, you can go directly to the reporting agency’s website, or you can sign up for a Nav account, which will give you access to information from multiple reporting agencies. 

If you are listed, then your next move would be to make sure that you have a few accounts reporting your payment history. Detweiler recommends having at least three active account, in good standing and that meet the requirements of D&B.

If you aren’t listed, that’s OK. There are a few ways you can fix that. One is to register your business with D&B to receive a DUNS number. Additionally, you can open a business credit card and/or vendor account, both of which are discussed below.

3. Open a Business Credit Card

If you don’t have credit, or if you need to improve your business credit, you will need to begin to build credit by showing a history of responsible payment activity. Qualifying for and paying back a loan is a great way to do that, but it’s not always feasible if your credit profile isn’t up to par.

That said, a business credit card can offer you the same opportunity, and in many cases, your personal credit score can or will be factored in. If you have good credit, you’re more likely to get approved and secure a reasonable rate. Once you open the account, keep it active and in good standing by using it and regularly paying your bill.

4. Consider a Business Charge Card

Business charge cards don’t charge interest but instead require you pay them off in full rather than maintaining a revolving balance. A business charge card like the Nav Prime Card* (available exclusively to Nav Prime users) provides a way to build business credit with frequent use while also avoiding interest.

Using a charge card for your business could be a great step forward for your finances. (Plus, you’ll also get a second business tradeline by simply making your monthly Nav Prime payment!)

5. Work with Vendors

A credit card isn’t the only way to build credit. Sparking up relationship with a vendor, or three, will also help build credit. To do this, look for lenders that offer a “buy now, pay later” option and that report to the major credit reporting agencies. 

Consider looking into possible partnerships with vendors like Grainger, Quill, and Uline, all of which report to the credit agencies, and, even better, don’t require you to enter your social security number, meaning your personal credit won’t be considered.

6. Pay on Time (or Early)

Paying on time is essential to building good business credit. Not doing so can leave nasty blemishes on your report. For that reason, it’s worth considering auto payments or scheduling payments ahead of time, even if it’s for the minimum amount due. 

However, if you can afford to pay early, then consider doing so. Not only will this negate the risk of late payments (obviously), but it can decrease the amount paid in interest, increase your available credit, and positively impact your credit score.

7. Make Your Business Legally & Financially Independent

This may not directly impact your credit, but it can help make your business more attractive to lenders. And, when lenders are more eager to do business with you, you’ll have access to more financing options and better rates. Combined, those things frequently translate into more manageable debt/repayment terms, both of which will allow you to build a good credit score.

Here, there are two major considerations at play. The first is your business as a legal entity. Some business owners, particularly in the beginning, are temped to operate as a sole proprietorship, and while that does have its advantages, it’s not always favored by lenders (or safe for your personal affairs).

Corporate structures, like LLCs and S-corps separate your business from your personal assets (always a plus), and many lenders want to see that a potential business borrower has an official business structure before moving forward with any financing opportunities.

In addition to legally separating your business from your personal financial and tax obligations, it’s also wise to open up a bank account that is in the name of your business. This will come in handy when lenders want to get a better picture of your financial history, and it can also help you manage your finances without having personal spending muddying the waters.

8. Have Patience

On a final note, as you start to build your business credit, patience will be a key virtue. While a quick sprint in the early stages of your efforts can lay a great foundation for the future, when it comes down to it, this is a slow and steady race. 

Don’t be surprised if it takes two to three months to see the fruits of your efforts. Business credit card activity can take between 30 and 60 days to report, and vendor activity can take anywhere between 60 and 90 days.  

That may seem discouraging, but take heart in knowing that not all business owners make a gallant effort at building a solid foundation, meaning if you stay the course and make the effort, you’re putting you and your business at the front of the pack.

FAQs

• How do I build business credit ASAP?

  To build business credit quickly, start by establishing a separate business entity, obtaining an EIN, and opening a business bank account. Use this account responsibly, make prompt payments to vendors and creditors, consider getting a secured business credit card, and ensure your business information is reported to credit bureaus to establish a positive credit history.

• Can you really build business credit in one month?

  Building substantial business credit within just one month is challenging due to the time required to establish a credit history and demonstrate creditworthiness. However, taking proactive steps such as setting up a business entity, opening a business bank account, and making on-time payments can begin the process of building a foundation for future credit.

• Can you get business credit right away?

  Building significant business credit right away is unlikely, as it takes time (usually at least six months) to establish a credit history and demonstrate creditworthiness.

• How long does it take to build business credit?

  Building business credit typically takes around six months to a year of consistent financial activity, including making on-time payments to creditors and vendors, maintaining a positive bank account balance, and demonstrating responsible credit usage. However, achieving a strong and established business credit profile may take several years of diligent financial management.

*DISCLAIMER: Nav Technologies, Inc. is a financial technology company and not a bank. Banking services provided by Blue Ridge Bank, N.A., and Thread Bank, Members FDIC. The Nav Visa® Business Debit Card is issued by Blue Ridge Bank, N.A. or Thread Bank, and the Nav Prime Charge Card is issued by Thread Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa cards are accepted. FDIC insurance is available for your funds on deposit, up to $250,000 through Blue Ridge Bank, N.A. or Thread Bank, Members FDIC. See Cardholder Terms for additional details.