Two female business owners stand at a storefront counter and discuss how to build business credit.

How to Build Business Credit


Improve business credit with vendors, insurance, landlords, and overall finances.

Establishing a good credit history is an essential tool for growing a small business. Your business credit score can help your firm qualify for favorable interest rates on loans and lines of credit. Vendors and suppliers as well as landlords also may check your credit history to decide if they want to do business with your company or to extend payment terms. Insurers want to assess your company’s creditworthiness before issuing policies to protect your business from unforeseen risks.

Good business credit can also help you negotiate better deals with suppliers and vendors and open the door to new contracts and partnerships with other businesses. A solid business credit record announces to the world that your company is on solid financial footing and can be trusted to pay its debts on time. Here are ways to build that essential business credit.

Keep Your Business and Personal Finances Separate

If your business is structured as a limited liability company (LLC) or an S or C corporation, your company should establish its own credit apart from your personal credit. This important legal separation between your company’s finances and your personal finances protects your individual assets and credit from claims and litigation by business creditors. If you operate as a sole proprietorship, however, the credit and financing you obtain for your business will show up on your personal credit reports, and any financial difficulties your company incurs will affect your personal credit rating.

You can still establish credit in your business name as a sole proprietor, but it is vital that you keep your business and personal finances separate. Get your business properly established by registering it with your state government and obtaining a federal tax ID, known as an employer identification number or EIN, and always conduct business in the name of your company.

All companies, regardless of their structure, should have a business bank account and should pay bills and make purchases with this account or a business credit card to avoid commingling personal and business funds. Lenders will also want to review your company’s business banking transactions when you apply for a small-business loan, line of credit, or other type of financing.

If you are just starting out in business, you may be able to qualify for a business credit card based on your personal credit score and income from a variety of sources. The purchases and payments you make with your business credit card will be reported to the major business credit reporting agencies: Dun & Bradstreet, Experian, and Equifax. That can start you on your way to building a business credit history. Payments for any financing you obtain for your business will also show up on your business credit report.

Apply for Credit With Business Partners

Having diverse accounts that extend credit to your company will help build your business credit history more quickly. Consider applying for trade credit with your vendors and suppliers. Instead of having to pay for supplies and inventory upfront, you can defer payment based on the financing terms you negotiate (typically 30 days after receiving an invoice), which also can help in managing your cash flow.

Vendors and suppliers aren’t required to report your purchases and payments to business credit reporting agencies, however. Try to do business with those companies that voluntarily report, or request that they do so.

Any service contract you obtain for your business for things like internet access, a cell phone, cable, web hosting, and leases will also add to your business credit history.

You should periodically monitor your business credit reports to correct any outdated or inaccurate information or to see if you should add new accounts to help build your credit history. The business credit agencies charge a fee to access your company’s credit report and scores, but you can get a free summary of your business’s credit history from a few third-party companies, such as NAV, a financial tech company.

Pay Your Bills on Time

The most important thing you can do to establish a good business credit score is to settle your company’s debts on time. Business credit reports track the number of days you are delinquent in paying a bill. If you have an agreement with a vendor to pay in 30 days and you pay three days late, your credit score gets dinged. If you can, pay early to add bonus points to your score.

Establishing a good business credit history can take several months to a year while you add accounts that extend credit to your company. But building business credit before you need it to acquire loans and negotiate bigger contracts is a wise business decision that will enable your company to grow and thrive.

Talk with a Relationship Manager today to find out how Fifth Third can help your business grow.

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