Thursday, September 30, 2010

How Do You Build Business Credit?

How do you build your business credit?

Here’s what Wells Fargo Bank (now the owner of Wachovia Bank) has said regarding Separating Personal and Business Finances...

"The longer you delay establishing business credit,
the longer you delay taking advantage of business loans."

By strengthening your business credit, you will not have to use the owner or shareholder(s)’ guarantee(s) for loans, leases, credit cards and other sources of debt financing. If your company has a strong operating history and financials to support this, you can build your credit. If you have not already done so, do the following as soon as possible to build your small business credit:

  • Make sure you are registered with Dun and Bradstreet and have a D&B number. Then sign up for the free self-monitoring system.
  • Obtain credit cards from Staples, Office Depot or other office product provider up to the amount allowed with no guarantee. Use these cards to purchase your office supplies.
  • If you have lines of credit with any of your vendors or suppliers, ask that they report this information – and your performance - to D&B. If you do not have any lines of credit, ask for them.

o Each year, see if you can increase the size of the credit line. Make sure you use it as appropriate to keep the credit line there. (i.e., If you have a $50,000 credit line but always pay within 10 days by check, your credit line will disappear. You should place your orders using the credit line, then pay off the credit line every 30 – 60 days.

  • If you have a bank or other financial institution business loan, even if it is guaranteed by an individual and another corporate entity, make sure that the loan is reported on the COMPANY’S credit report. Properly paying a bank loan can very positively impact your credit.
  • Check your D&B report quarterly, but no less than annually. Make sure that any loans, leases, or other debts showing are correct. Many times entities report when they file a UCC but don’t report when the loan is paid off. So what’s showing on the company’s report will make it seem like it has a higher debt ratio than it actually does.
  • Pay your suppliers within their specified terms. Make sure that you are working with at least 2 suppliers who report to D&B and/or Experian. Otherwise, your great payment record is completely unknown.


In addition, you should have a business plan. The bank will look at the company’s credit profile, its financial history, financial projections, and the business plan.



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