What Is Business Credit?
Business credit is a measure of your business's creditworthiness that's separate from your personal credit. It allows your business to build its own financial identity and access funding without relying solely on your personal credit score.
- Protect your personal credit and assets
- Access larger amounts of funding
- Build business value and credibility
- Separate business and personal finances
- Potentially better interest rates and terms
How to Structure Your Business to Build Business Credit
To build strong business credit scores, your business must be properly structured and have the following foundation:
- Legal Business Entity: LLC, Corporation, or Partnership
- Federal EIN (Employer Identification Number)
- Business Bank Account: Separate from personal accounts
- Business Address: Not a P.O. Box
- Business Phone Number: Listed in directory assistance
- Professional Website and Email
THE ROADMAP TO SUCCESS
📍 Legally Structure Your Business
Form your LLC or Corporation and obtain your EIN from the IRS. This creates the legal separation between you and your business.
📍 Apply for Tier 1 Accounts & Complete Payment Experiences
Start with trade credit accounts that report to business credit bureaus. Make purchases and pay on time to establish positive payment history.
📍 Apply for Tier 2 Accounts & Complete Payment Experiences
Move to higher-level trade accounts and business credit cards. Continue building positive payment experiences.
📍 Apply for Tier 3 Accounts & Complete Payment Experiences
Access premium business credit products including lines of credit and term loans.
📍 Have OPM (Other People's Money) Available to Build and Scale Your Business!
Achieve the ultimate goal - access to significant funding to grow your business without personal guarantees.
The Three Business Credit Reporting Agencies
Your business credit is tracked by three main agencies:
Experian Business
Score Range: 1-100
Industry Leader: Most widely used by lenders
Dun & Bradstreet
Score Range: 1-100
PAYDEX Score: Payment behavior tracking
Equifax Business
Score Range: 101-992
Focus: Small business financing
Should You Use Personal Guarantee to Get Business Credit?
SHOULD YOU USE PERSONAL GUARANTEE TO GET BUSINESS CREDIT
Yes. Using your personal credit report is the best and simplest way to get access to business funding. For a couple of reasons:
- Most banks and lenders are going to ask for your SSN anyways to guarantee the funding that you're looking for
- It's the fastest way to get access to capital. Although most of this ebook highlights getting funding through your EIN, building credit strictly through your EIN using vendor accounts takes time. When you leverage your personal credit report, this allows you to get access to funding much faster.
- You can leverage your personal credit report to get funding for more than one LLC when you use your personal credit report
Make sure your personal credit is optimized: Monitor your FICO scores | Professional credit repair
There's nothing wrong with going either route, it's all about what makes sense for you, your business, and the plan you have for the funding you look to acquire, but it's good to keep this in mind.
Building Business Credit: The Tier System
Tier 1 Vendors (Net 30 Accounts)
These are your starter accounts that typically don't require a credit check:
Tier 1 Vendor Examples:
- Uline (Industrial supplies)
- Grainger (Industrial equipment)
- Quill (Office supplies)
- Crown Office Supply
- Business Coalition
- Fleet Pride (Automotive parts)
- Northeastern Supply
Tier 2 Vendors (Store Credit Cards)
These require established business credit and may require a credit check. For businesses looking to optimize their existing business credit cards, consider Business Credit Card Conversion to maximize your available capital:
Tier 2 Vendor Examples:
- Home Depot Business Credit Card
- Lowe's Business Credit Card
- Staples Business Credit Card
- Amazon Business Credit Card
- Dell Business Credit Account
- FedEx Business Credit Account
Tier 3 Vendors (Major Credit Products)
These are premium business credit products requiring strong business credit:
Tier 3 Options:
- Business Lines of Credit
- Business Term Loans
- Equipment Financing
- SBA Loans
- Major bank business credit cards
Alternative Business Credit Options
Business Loans Without Personal Guarantee
Some lenders offer business loans without requiring a personal guarantee:
- Kabbage: Online lending platform
- Fundbox: Lines of credit for small businesses
- StreetShares: Veteran-focused business lending
Other Funding Options
Personal Credit Route: Many businesses that need funding take the help of personal credit instead of business credit. However, this step should only be taken when you have no option of funding from any direction.
Why avoid personal credit? Personal credit is limited and is not as rewarding as business credit. Plus, it also affects your credit score!
If you must use personal credit, optimize it first: Get comprehensive credit monitoring and consider professional credit repair services to maximize your scores.
Additional Funding Sources
- Friends and Family: Ask willing investors for startup capital with formal contracts
- Business Grants: Free money based on business quality and detailed business plans
- Angel Investors: High-net-worth individuals looking for investment opportunities
- Crowdfunding: Platforms like Kickstarter or Indiegogo
Step-by-Step Action Plan
Month 1-2: Foundation Building
- Form your business entity (LLC/Corporation)
- Obtain your Federal EIN
- Open business bank account
- Establish business phone and address
- Create professional website
- Register with Dun & Bradstreet
- Set up your business credit monitoring and building system
Month 3-4: Initial Credit Building
- Apply for 3-5 Tier 1 vendor accounts
- Make small purchases and pay on time
- Ensure vendors report to credit bureaus
- Monitor your business credit reports
Month 5-6: Expanding Credit
- Apply for Tier 2 store credit cards
- Continue perfect payment history
- Increase credit limits where possible
- Add more vendor accounts
Month 7+: Advanced Credit Products
- Apply for business lines of credit
- Consider SBA loan programs
- Explore equipment financing options
- Maintain excellent payment history
Monitoring and Maintaining Business Credit
Regular Monitoring
- Check reports monthly: Monitor all three bureau reports
- Dispute errors quickly: Address inaccuracies immediately
- Track payment history: Ensure all payments are reported correctly
- Monitor credit utilization: Keep balances low relative to limits
Best Practices for Maintenance
- Pay all bills by the due date (never late)
- Keep credit utilization below 30%
- Maintain relationships with vendors
- Gradually increase credit limits
- Use business credit regularly but responsibly
- Keep business and personal finances completely separate
Success Requires Investment
Building business credit is not a get-rich-quick scheme. It requires time, patience, and strategic planning. However, the rewards of having strong business credit are substantial:
- Access to capital for growth and expansion
- Better terms and interest rates
- Protection of personal assets
- Increased business credibility
- Potential for significant business scaling
Ready to explore funding options for your business? Apply for business funding today.