How to build business credit?

Even though you may start off relying on your credit, it’s prudent to keep your business and personal finances separate, and the first step is to start building credit in your company’s name.

Every business is different, but here are 5 steps to help you figure out your plan:

1. Pick the Right Structure

To make sure your business is separate from you as an individual and you can start building business credit, you’ll need to select a business structure (LLC, LLP, or corporation) and register your business. Keep in mind that sole proprietorships are not legally distinct entities.

The steps during and after registering can be different depending on your structure, so consider looking into resources like the Small Business Association Business Guide.

       2. Get a Federal Tax ID Number (EIN)

An EIN is a nine-digit number that you will use to fill out company tax returns, open business bank accounts, and apply for business credit. You can apply for one for free from the IRS.

       3. Open a Business Bank Account

The next step after getting an EIN is opening a business bank account, which is one of the most important ways to keep personal and business expenses separate.

Your business bank account plays an important role in your application for business credit, overall funding, and review from any bureaus.

      4. Apply for Business Credit

Since your business may not have any loan payments or other credit history, payment history with vendors may be one way to demonstrate creditworthiness.