You can’t build a reputation on what you are going to do.” – Henry Ford
How Do I Build Business Credit From Scratch?: Building business credit is essential for the financial health and scalability of your company. Whether you’re a startup founder or a small business owner, establishing business credit from the ground up improves your ability to secure financing, negotiate better terms with suppliers, and manage cash flow effectively.
According to Shopify, only 45% of small business owners are aware of their business credit scores, highlighting a major knowledge gap that can hinder long-term success. Let’s dive into how to build business credit from scratch and why it matters.
Establishing The Foundations Of Business Credit
The first step to building business credit is to separate your personal and business finances. This distinction is critical for legal protection and for building a financial history under your business’s name.
Key Steps To Start Building Business Credit:
- Register your business legally (LLC, LLP, or corporation).
- Get an Employer Identification Number (EIN) from the IRS—it functions like a Social Security number for your business.
- Open a business bank account under your legal business name.
- Apply for a D-U-N-S Number from Dun & Bradstreet—this helps vendors and lenders assess your creditworthiness.
As Zeni points out, maintaining clean financial records and using accounting tools from day one will make your credit-building journey more efficient.
Using Credit Cards & Vendors To Build Credit History
Once your business entity is set up, start establishing trade lines and credit activity.
Smart Ways To Build Credit:
- Apply for a business credit card designed for startups. Shopify recommends options that offer low interest and reporting to all major credit bureaus (Shopify’s top picks here).
- Work with vendors who report to credit bureaus (e.g., Uline, Grainger, Quill).
- Make timely payments and stay below 30% credit utilization to maintain a strong credit profile.
According to NAV, businesses with strong credit profiles are 41% more likely to be approved for loans than those without established credit.
Monitoring And Growing Your Credit Profile
Once your credit activity begins, regularly monitor and manage your business credit just as you would your personal score.
Tips For Long-Term Credit Health:
- Use credit responsibly and consistently.
- Pay off balances on time—payment history accounts for 35% of your credit score.
- Keep your credit utilization ratio low.
- Check your credit reports regularly with agencies like Dun & Bradstreet, Equifax, and Experian.
Maintaining a good business credit score can help you qualify for lower interest rates, better leasing terms, and favorable vendor contracts.
FAQs
What Is Business Credit And Why Is It Important?
Business credit is a record of a company’s ability to repay debts. A strong score helps in securing loans, vendor credit, and better financial terms.
How Long Does It Take To Build Business Credit?
Typically, it takes 3 to 6 months to establish a business credit profile, but building a strong score can take longer depending on usage and payment habits.
Do I Need A Business Credit Card To Build Credit?
Yes, a business credit card is one of the easiest ways to build and report credit activity regularly. Shopify’s recommendations offer excellent starting points.
What Is A D-U-N-S Number?
It’s a unique nine-digit number issued by Dun & Bradstreet that identifies your business and is essential for establishing business credit.
Can Sole Proprietors Build Business Credit?
Yes, but it’s more effective when operating as an LLC or corporation. Sole proprietors can still open business accounts and apply for credit cards in their business’s name.
Will My Personal Credit Affect My Business Credit?
Yes, in early stages, lenders often check your personal credit. But as your business credit grows, it can stand independently.