How to Build a Business Credit Portfolio

Most businesses do not qualify as nonprofits, but those that are need to establish themselves accordingly. The finances of nonprofits are completely separate from the business owners and offer full liability protection. However, nonprofits also have a 501(C)3 or tax exempt rating since they do not technically make a profit. A charity would qualify for a nonprofit corporation.

Filing as a corporation, no matter the type, proves a company’s authenticity and reliability to creditors and potential investors. But building a portfolio takes more time and effort than simply filing the paperwork to become incorporated.

After determining which type of corporation your business needs, register with a credit bureau. The credit bureaus used regularly are Dun & Bradstreet, Business Experian, and Business Equifax. In fact, 99 percent of potential investors and creditors use these bureaus to determine how they will invest their resources. Registering with each credit bureau requires your EIN number provided by the IRS once a business is incorporated. Register with each bureau separately, and make sure to monitor your credit report. You will be provided with a DNB (DUNS) number by the bureaus. Even if your credit reports are blank, check them to be sure the information is accurate, and check them later, periodically. It is sound business sense to keep track of your companies credit as well as your own. You can begin applying for credit at any time, but it may take up to three years to actually obtain the credit you really want.

Creditors are more comfortable lending money to an established business. Three years from the date a business is listed as a corporation is when creditors provide a company with larger credit limits. The reasoning is due to the fact that a large percentage of companies fail within the first three years of opening. This does not mean that it is impossible to obtain credit before that time, but the amount offered to a new business will be substantially lower than the amount offered to an established company. Having credit, even if you do not need to use it, will increase your ability to obtain loans or further credit when it is time to expand the business. A good rule of thumb is to apply for credit every six months.

Never use your personal information when applying for business credit. This includes your social security number and date of birth because the business account will be tied to your personal finances if personal information is used. Even business owners who pay their bills on time will lower their personal FICO scores by elevating their debt to income ratios. EIN and DBN numbers are what you needed to file for business credit in place of a social security number.

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