Although your credit score is totally irrelevant to working with us, here at Fast Up Front, it is still key for small businesses like yours. Despite that, the vast majority of small business owners don’t seem to understand how business credit is established at all, let alone GOOD business credit.
Because of its importance, I have compiled a list of steps to establishing business credit:
(Note: The scale for business credit scores ranges from 0 to 100. 75+ is an ‘excellent’ business credit rating. This is a totally different scale from personal credit scores, which range between 300 and 850 with an ‘excellent’ score of 680+.)
Obtain an FIN or EIN from the IRS. Go to the IRS website for information on applying. I’ve put together a list of links that compare the liability implications, cost, and other issues involved with running a sole proprietorship vs. a partnership vs. a LLC vs. a corporation. See my entry on small business structures.
Register with the business credit bureaus.
The four major business credit bureaus are (in order of importance):
Dun & Bradstreet (DNB, D & B) – Paydex score
Experian Business – Payquo score
Business Credit USA
Make sure you are in legal compliance, etc. Proper licensure, etc. Follow local, state, and federal requirements for your industry. Additionally, you may want to consider membership with the Chamber of Commerce in your area, or the Better Business Bureau.
Have supporting materials available. An extensive list of a typical request list from creditors can be found here. You will probably have to write a business plan/summary and provide balance sheets, and other financial statements.
Maintain good relationships with your vendors. Make sure they report your payment history with the business credit bureaus. These vendors provide the foundation of your credit report and can be used as references if you want a commercial business loan. Clearly, part of maintaining a good relationship means timely payment, etc. But it also means, working with one person at each vendor and creating a friendly working relationship. In many cases, the people you work with on a regular basis at vendors can count as “employees” with the credit bureaus, raising your score.
Of course, you could just forget all this, and use us – we don’t need to run a credit check in order to put money in your hand.
Sites I used to compile this list included Ibank.com, entrepeneur.com, andstrongbusinesscredit.com