Why should you apply for a business credit?
If you have a very small business, like a sole proprietorship, you might feel like a business credit card is unnecessary—after all, you have a personal credit card, so you may be wondering if it’s realistically worth all the effort to learn all of the business credit card requirements and actually complete an application.
If you’ve ever asked those questions and feel like business credit is a mystery and you want to unlock the secrets to leveraging it within your business, continue reading as business credit is TOTALLY different with an entirely different set of rules than personal credit.
Regardless of the age, size, or type of business you have, getting a business credit card is not only beneficial but an essential step in the financial progression of your company.
Why This Is Important
There is no way to “repair” business credit because the Fair Credit Reporting Act only applies to consumer (personal) credit, not business credit.
In fact, creating a separation between your business and personal finances is one of the first actions you’ll want to take when you start your business—for both organizational and legal reasons. Separating these finances will not only make things easier come tax season, but it will also protect your personal finances from any potential legal trouble that arises with your business. Plus, if you’re an LLC or a corporation, you’ll need a “corporate veil” between you and your business, in order to legally protect yourself from becoming personally liable for your company’s debt or any legal issues that might arise from a lawsuit.
This being said, applying for and getting a business credit card is a great way to establish this separation—after first signing up for a business bank account, of course.
Keep this in mind – Even if you have an 850 personal credit score, you never want to take out a loan for your business in your personal name or social security number, because you will be held personally responsible for the business debt, making it a huge personal liability.
You want to avoid being personally responsible because there’s always a chance your business falls onto hard times, and if you can’t pay those expenses on time, (without a personal guarantee) it won’t negatively affect your personal credit report.
BUSINESS CREDIT CARD REQUIRMENTS
So, let’s dive into exactly how to go about building a healthy business credit profile.
Form a legal business entity like a corporation or an LLC; this will be the very first step in building business credit because it separates you from your business.
Then apply for a tax ID or an EIN, next open a business bank account.
Register the business with Dun and Bradstreet, they are the biggest business credit bureau in the United States. They offer Free and Paid options. Once registered, the business will be issued a Paydex score, which is your new “business” credit score.
Unlike your personal credit score, your Paydex scores are on a scale from 1-100. Paydex scores are much like consumer FICO scores, but there are some key differences.
Instead of reflecting your personal credit history, your Paydex score determines your businesses creditworthiness – more specifically it reflects how promptly your business pays your creditors and suppliers and the performance of your payment history.
Lenders will take a look at your Paydex scores to determine if they will lend to your business, checking your Paydex score and your reliability of paying debts on time.
Start building your Paydex score by acquiring vendors that report to Dun and Bradstreet and Experian. Here are a few that will provide credit without a personal credit check.
Net 30 Business Accounts
One of the easiest ways to start off on the right foot when it comes to building business credit is to acquire net-30-vendor accounts with companies that report to commercial credit agencies. Pay on time and you will build credit references that help boost your business credit scores.
A net-30 account is one that extends you 30 days to pay the bill in full after you have purchased products. It’s vendor credit that allows you to buy now and pay later. Vendors that report those payments to commercial credit agencies help your company establish strong business credit.
Before jumping in and applying for these accounts, it is crucial that your business entity is structured correctly. If you are sure that it is, then jump right in. On the other hand, if you are not sure, check out our post 12 Steps To Starting Your Business. If you still have questions after reading, grab our FREE Business Credit Building Tips Cheat Sheet.
1. Office Depot/OfficeMax
Office Depot/OfficeMax is an office supply company that operates all over the United States. They sell computers, printers, software, supplies, and more. They used to offer net-30 accounts; however, now they’ve switched to net-20 accounts. They report to Dun & Bradstreet monthly.
To set up a net-20 account with Dun & Bradstreet, follow these steps:
- Visit their Business Services website.
- Click the blue “Get Started” button to the right of the login section.
- Follow the prompts to provide your information and click submit.
- Wait for a sales representative to contact you, and they will open up a new business account.
- Wait for your net-20 account to be approved (approximately 24-48 hours).
2. Wise Business Plans
Wise Business Plans provides business owners with the help they need to start, run, and grow their business in a way that consistently makes them money. To help these businesses, even more, they also offer flexible net-30 accounts for startups and established businesses wanting to build business credit.
Wise Business Plans reports to all the major business credit bureaus like Dun and Bradstreet, Experian, and Equifax.
Before you apply, make sure you’ve been in business for at least 30 days, have an EIN, have an optional DUNS number, and have no derogatory marks on your business credit reports recently.
Here’s how to apply for a Wise Business Plans net-30 account:
- Visit Wise Business Plan’s website.
- Scroll to the bottom of their home page
- Click on the “Net 30 Account” link under Business Funding.
- Fill in your business information and click submit.
- You’ll receive an email within 24 hours with an approval decision and a list of services you can purchase to help grow your business.
3. Creative Analytics
Creative Analytics is a digital marketing agency and management consulting firm that offers both a variety of essential products (such as small electronics, desk, and office decor/accessories, fitness items, beauty professional tools, kitchen items, etc) and monthly digital marketing services (e.g. websites and social media plans) to grow your business. The best part is those account holders that sign up for monthly subscriptions get monthly revolving accounts that report to business bureaus with an up to $10,000 tradeline boost. They currently report to Equifax and Creditsafe.
An annual fee of $79 is required to apply, but all applications that meet the minimum criteria are approved (denials that don’t meet stated criteria are fully refunded). There is a minimum spend of $100 to be reported (the annual fee counts toward that minimum).
To qualify for a NET 30 business account your business must:
- Must operate in the United States
- Must have a Tax ID # (EIN)
- Established for at least 30 days.
- Must not have any derogatory business reporting or delinquencies.
- Applicant must be an Authorized Officer of the organization.
4. Business T-Shirt Club
Business T-Shirt Club is a membership-based print & embroidery company offering access to premium apparel brands at wholesale rates, high-quality custom print & embroidery services, print-on-demand fulfillment services, corporate partner discount programs, and much more. The annual membership fee is $69.99.
Payment history is reported to Equifax, Creditsafe, Ansonia & Cortera.
Uline offers a wide variety of products your business may need including shipping boxes, office furniture and supplies, foodservice packaging and kitchen supplies, and more. shop, select Net 30 billing option during the checkout process. Qualified business customers will receive a net billing account.
Pay on time or even make an early payment and you’ll have another credit-building account under your belt. Like Grainger, this account is considered quite easy to get. You don’t need to submit your Social Security number and your personal credit scores won’t be checked. Uline reports to business credit bureaus including Experian (business).
Another place to get office supplies online, from printer ink to pens, is Quill. When you set up your account you will be asked to fill out a profile that describes your business, including the year the business was started and the industry in which you operate. (Don’t be discouraged if your business is young; newer entrepreneurs often report success getting a Quill account.)
Once you find what you want to buy, add it to your cart. Proceed toward checkout and you’ll see a payment option called “invoice my account.” If approved, you’ll get net-30 terms on your invoice. According to Quill, approval can take 1-2 hours during business hours, or up to a business day if you apply outside normal business hours, Monday through Friday.
Similar to the other two vendors mentioned here, you don’t need to provide a Social Security number. Quill will verify your business address before extending terms. Again, most business owners who have properly set up their businesses should find it to be an easy process.
7. Summa Office Supplies
Another net-30 vendor who reports to credit bureaus is Summa Office Supplies, where you can shop for paper, folders, envelopes, labels, and any other office supplies your company might need.
The great thing about Summa is that they offer credit for both new and well-established businesses, and they’ll provide written trade credit references upon request. Pay your bill on time and then you can request larger credit lines. Summa reports to Experian and Equifax business credit.
Grainger offers a large variety of products for businesses, including tools, plumbing supplies, and safety equipment. They also offer office and janitorial supplies. There is a very wide variety of merchandise offered, so you should be able to find something your business needs.
Signing up for a Grainger account is free and easy. You can create your online account to store shipping and invoicing details, but you’ll need to call 800-GRAINGER (472-4643) to set up your line of credit.
9. PayPal Working Capital
Unlike a traditional bank loan or a credit card, PayPal Working Capital does not require a personal credit check or a personal guarantee. Applying for PayPal Working Capital is faster than applying for a bank loan, and you will see the money in your PayPal account in a shorter amount of time.
If your business requires you to source products from local vendors or tradeshows, always ask the vendor when opening an account, if they report to the credit bureaus.
Now, remember – when opening business accounts make sure don’t attach them to your personal credit.
You can do this by simply leaving your social security number blank if it is asked for. Most vendors are okay with this.
If the vendor requires your social security number, DON’T APPLY. Go somewhere else! Again, it is very important to keep your business and personal liabilities separate.
Once you have 5 accounts reporting to Dun and Bradstreet, you can generally get approved for accounts with companies like:
- Best Buy
- Sam’s Club
WITHOUT a personal guarantee or consumer credit check.
Now that you have a basic understanding of how you can get business credit started, here are a few expert tips to help you really build.
First, you will need to use your business credit accounts so they don’t go dormant. If you don’t use them, the vendors will stop reporting. Try to make a purchase every 30-60 days on each account.
Second, unlike personal credit history where as long as you pay before the due date you’re good, Paydex scores your payment history slightly different. The faster you pay off the balance, the better the impact on your Paydex score. So, you will want to pay your bills as fast as possible – preferably right away long before the due date.
Finally, build your build up your Paydex score faster, by using the business accounts as much as possible, and purchase everything using business credit.
Pay your bills with your business line of credit. Pay for fuel, food, and any expenses that you would normally pay with personal credit or cash, instead use your business credit accounts to build your Paydex score.
In conclusion, remember the following –
Start to build (and improve) business credit by:
- Establishing a federal EIN number by legally registering your business
- Getting a business checking account and/or credit card
- Working with vendors who will report your payments
- Making timely (or early) payments to these vendors
- Spend within your business’s means
- Monitor your business checking report
Let us know how you’ve built business credit in the comment section below
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