Chip Lupo, Credit Card Writer
New businesses can get credit by getting a business credit card that reports monthly to business credit bureaus. Business owners can also establish their business as a legal entity, open a business bank account, and build relationships with vendors who report to business credit bureaus, which legitimizes their business.
Building a solid business credit history is vital for you to be able to secure business loans in the future. Bear in mind also that issuers rely heavily on your personal credit when you apply for a business credit card, so the better your personal credit standing is, the more likely you are to qualify for elite business credit cards.
How to Get Credit as a New Business
Establish your business
Setting up your business as a corporation, partnership, LLC, or other legal entity is a key step in helping you become eligible to get business credit. If you’re a sole proprietor, you may have a better chance at getting business credit if you establish your venture as a legal entity. You will also need to create a legal name and set up a business phone number. It’s important that you register your business with the state in which your business is headquartered to ensure you’ve met all the legal requirements.
Apply for an EIN
You can apply for an EIN through the IRS online, by fax, or by mail. The EIN is the number the IRS uses to identify your business and is the ID number you will need to apply for business credit, file business taxes, open a business bank account, and apply for business licenses. A sole proprietor does not need an EIN and can apply for business credit using his or her Social Security number instead.
Open a business bank account in your legal business name
Setting up a business checking account is key to keeping your business and personal finances separate. A business checking account will also establish a relationship with a bank or credit union, which will be helpful when it comes time to apply for a small business loan.
Establish and build relationships with vendors
You can also build business credit through the vendors that contract with your business to provide essential supplies and other materials. It’s best to do business with vendors that report your account activity to the business credit bureaus. Not all vendors report to credit bureaus, so verify which vendors report and sign on with the ones that do.
Self-report to the credit bureaus
“Self-reporting” allows you to let the business credit bureaus know that you’re making timely payments on accounts with clients and suppliers who aren’t already reporting to the business credit bureaus. It’s important to note that you cannot self-report your info directly to the business credit bureaus until you become an official “data furnisher” through one of the bureaus. You must apply for membership in the credit bureau’s business reporting program – for a fee, in some cases – and be approved before you can self-report.
Open and use a business credit card
Once you’ve opened a bank account and your business is up and running, you should open a business credit card and use it every month. You will need to make payments, preferably in full, to build a good business credit score.
Bear in mind that you don’t need a business credit score to get a business credit card, and most issuers will check your personal credit to see if you qualify. To find the right credit card offer for your needs, check out our editors’ picks for the best business credit cards for new businesses.
For additional info, be sure to check out our guide on how to build business credit.
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