Establishing business credit and keeping it in excellent condition is important to any business. Even if you have started as a home business or small business, you surely have plans to grow in the industry. Sooner or later, when your business gains experience in the market and your customer base grows, you are planning to expand your business. With this in mind, having excellent business credit to back you up would definitely be a bonus.

You may have purchased business loans or business credit cards using your personal credit history. But once the business has started, you must make the decision to establish a separate credit history for your business. Why is this important? Business credit gives your business a more credible position in the eyes of the lenders, investors, suppliers, and other businesses you will be dealing with.

How is credit established in business?

First, you must establish the identity of your company. This is done by registering your business as a corporation or LLC (Limited Liability Company). You will also need to obtain all business licenses required by your local state. Having a physical business address is another important requirement to be recognized as a legitimate business.

The next step would be to register with a legitimate business credit reporting agency. In the US, most companies are registered with Dun & Bradstreet. You can complete your application online and wait for the process to complete within 30 days. To be approved, you will need to provide basic details as well as financial information about your business.

Business credit cards to build credit

After receiving your D&B number, you are ready to build your business credit history. A great tool for your credit building history is a business credit card. You can use a business credit card to support your cash flow. Credit cards can be used to buy stocks, buy equipment, request repair and maintenance services with the option to pay them later.

The important thing to remember is to stay within your credit limit and send your credit card payments on time. Remember that late payments can seriously affect your credit history, while consistent and timely payment increases your business credit score or Paydex score.

To the extent possible, pay your balances in full each month to avoid incurring interest rates and late penalty fees. Although a minimum payment is accepted and most business credit cards offer a very low minimum payment, it is not recommended. Keep in mind that the longer you put off your payments, the higher the cost of your debts.

Business owners are also encouraged to check their credit reports regularly. Obtain a copy of your business credit report from D&B and carefully examine whether all the information on your report is correct and accurate. If there are errors, you should immediately contact the credit bureau that issued your report so that the necessary corrections can be made immediately.