How to Build Business Credit

Making progress toward bigger financial goals

In the fast-paced business world, having a well-established credit history is essential. Strong business credit can help secure loans, build trust with suppliers and clients, and show stakeholders your company is reliable and well-managed.

What Are the Benefits of Good Business Credit?

Good business credit not only demonstrates your company’s reliability and effective management, but Tim Kolek, Market President in La Crosse, WI, says, “Good credit enables you to obtain capital to grow your business, purchase inventory, hire employees, and cover day-to-day expenses.” Building good business credit can take the pressure off your personal credit while safeguarding your personal assets.

How to Build Business Credit

Start by creating your business profile through steps such as opening a business bank account, registering your business with the state, and determining its structure (e.g., sole proprietorship, partnership, or limited liability corporation). This process provides you with an Employer Identification Number (EIN), like a Social Security Number for your business, laying a solid groundwork for establishing credit with vendors and lenders.

Having a business bank account helps in separating personal and business finances and fosters a relationship with a local banking partner. Kolek says, “When it’s time to evaluate how the business is performing, the separation between business and personal finances helps determine business performance so you can make better business decisions like when to make capital improvements.”

Acquiring a business credit card and using it for transactions is helpful when trying to build credit. Kolek states, “Having a business credit card is an easy way to pay bills and earn rewards. Make sure you are paying the balance off each month to build a positive credit history.”

Another way to build credit is to pay your bills on time or early. This proves you can make good on your debts. Kolek recommends setting up auto-pay for your bills to help you avoid costly late fees or damaging your credit.

Credit Terms

To get the most bang for your buck, a business needs to establish different types of credit. Kolek states, “Many vendors allow credit terms for payment.” A credit term can be Net 30 meaning the payment must be made within 30 days. Some businesses offer Net 10, Net 20, or even Net 60, but the most common is Net 30. Kolek explains that businesses should keep the payment arrangements within predetermined limits giving you access to needed supplies and inventory.

How Long Does It Take to Build Business Credit

Building credit doesn’t happen overnight. It usually takes about 6-12 months to establish credit. Make sure to make payments on time, maintain a positive bank balance, and use your credit card wisely. Having solid business credit is an integral part of successful business operations.

Deposit placement through CDARS or ICS is subject to the terms, conditions, and disclosures in applicable agreements. Although deposits are placed in increments that do not exceed the FDIC standard maximum deposit insurance amount (“SMDIA”) at any one destination bank, a depositor’s balances at the institution that places deposits may exceed the SMDIA (e.g., before settlement for deposits or after settlement for withdrawals) or be uninsured (if the placing institution is not an insured bank). The depositor must make any necessary arrangements to protect such balances consistent with applicable law and must determine whether placement through CDARS or ICS satisfies any restrictions on its deposits.