I have been in business almost 3 years now and when I started, never thought about establishing business credit.  I have been approved for an Office Depot and Chase credit card in my business name but it was based on my personal credit with my social security number.

I recently attended a seminar that addressed how important it is for a business to establish credit in the business name with their tax or employer identification number.  So how does one go about doing this?

First, as an entrepreneur or business owner, you must decide which business structure best suits your business needs.  The preferred structure for establishing business credit is to have your business as a C or S corporation.  Either structure will provide the required statutes for corporate creditors to offer business credit to your business.

To be corporate ready, each business must have these essential items; 1.) Corporate Structure, 2.) Tax ID Number, 3.) D-U-N-S Number including a Dun & Bradstreet business profile,  4.) Verifiable Business Address, 5.) Business Telephone Number, 6.) Company Email, 7.) Standard Industry Classification or North American Industry Classification System Codes, 8.) Minimum 2 to 3 years of Business Operation, 9.) Business Bank Account, 10.) Be Profitable (if borrowing from a bank).

A business owner must also keep accurate records within the company and maintain a high level of professionalism on the social media circuits.  Corporate creditors are also requesting analytics of web data, monitoring social media sites, and investigating the background of the guarantor.  With the influx of so many entrepreneurs becoming business owners, corporate creditors are requiring a lot of personal data on the guarantor.

Once you have selected the appropriate business status and properly structured your company, established a verifiable address and telephone number, researched and acquired your company’s SIC/NAICS codes, obtain your TIN/EIN and D-U-N-S number and registered and completed your company’s business profiles with the three business credit reporting companies, you are ready to start building business credit for your company.

It is extremely important that the corporate information you report to all three business credit reporting companies, are identical. Consistency is critical when building your corporate profile.  Erroneous information will be reported twice and this can diminish your chances of establishing business credit.

Lenders usually desire a company to have been in operation for a minimum of three  years before considering extending loans or business lines of credit.  Two years in business will allow you to demonstrate stability and accountability.  This time frame will also allow for your company to earn a profit.  You will be able to present credible financial statements as well as your corporate tax returns.  Basically, this time frame will allow for your company to “season”.

Personal credit scores range from a low of 300 to a high of 850 on the Fair Isaac Corporation or FICO scoring model.  FICO is the most readily used personal scoring model on the market and is used in more than 90% of lending decisions.  Before you begin requesting business credit, request a copy of your personal credit report.  A good reference is to request your credit file a minimum of 120 days before applying for business loans.  Initiating the net business credit accounts can be achieved during the investigation of your personal credit profile.  The 120 day time frame will allow you enough time to initiate an investigation if you find discrepancies on your personal credit file.