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5 Steps To Build Credit as a Small Business

Jan 09, 2024
Posted by: Stearns Bank
Small business owner looking at ipad, planning her finances

As an entrepreneur, you have big plans for growing your company. But dreams of new equipment, expanded facilities, and more product lines remain trapped on the pages of your business plan without the funding to execute them.

Business credit frees those goals to become tangible investments. With strong credit established, more affordable financing options open up so you can take on that next milestone or quickly capitalize on opportunities without relying on personal assets alone.

Constructing this fiscal foundation for growth takes just a few straightforward steps. Keep reading to discover the key actions for establishing strong business credit and finally begin shaping your entrepreneurial dreams into tangible ventures.

1. Separate Personal and Business Finances

It’s tempting when starting a business to keep things simple by mingling personal and company funds. But separating your finances now is crucial groundwork for establishing business credit later.Small business owner using her credit card

Legally distinguishing your business lets you keep accurate financial records, track true profits/losses, and avoid personal liability. More immediately, independent accounts are an essential step lenders require to view your company as creditworthy.

Before imagining what business loans or lines of credit to apply for, take this foundational move to structure your business for long-term success. 

2. Obtain an EIN From the IRS

Think of an Employer Identification Number (EIN) as your business’s social security number. Just like your personal SSN, it’s a unique ID that registers your company as a recognized entity, now able to open accounts, build credit history, and more in its own name.

Getting an EIN takes just minutes online yet adds legitimacy no matter how early-stage your venture is. Simply provide basic information like your legal business name, address, ownership details, and contact info. The IRS instantly issues your EIN for immediate use.

With this new identifier, you can open dedicated business bank accounts, get vendor credit lines, and start separating finances from personal funds — crucial steps to control company cash flow. An EIN also enables monitoring your business credit reports and scores as you establish credibility over time.

3. Open Business Credit Accounts

Armed with your shiny new EIN, it’s time to start establishing independent business credit accounts — a vital move before applying for financing down the road.Small business owner unpacking boxes

Start simply with store credit accounts tied directly to key suppliers. Hardware stores, office supply shops, fuel companies, fleet vehicle services, and more offer credit lines specifically for business customers. Taking this step gets your company credit history formally started, with on-time payments reported to ratings agencies.

4. Apply for Business Credit Cards

Business credit cards offer opportunities beyond just spending flexibility and rewards points (though who doesn’t love free travel!). Applying for the right card strategically builds your company’s credit standing alongside supplier accounts.

Choose a card that offers the features and tools your company needs most. Compare aspects like interest rates and fees, of course. But also consider vendor-specific bonuses, employee spending controls, and accounting integrations. 

Use your new card wisely for routine purchases you can pay off monthly, like office supplies, software subscriptions, advertising campaigns, or shipping. Paying your balance in full and keeping it under 30% of the limit helps your business credit score the most. Don’t let interest charges eat into hard-earned revenue!

5. Monitor Your Business Credit

Keeping tabs on your personal credit is second nature. But proactively monitoring your business credit profile is just as vital as building your company's financial track record over time.Person looking at credit score on phone

Conduct regular reviews of your business credit reports, at minimum once a year. Checking in more frequently as you apply for financing enables you to catch any errors early. You can dispute mistakes directly with business reporting agencies, just like with your personal profile.

Addressing small dings or issues prevents them from escalating into major obstacles down the road. Don't let early blips in your reports become barriers to securing crucial funding as your company grows. A few minutes of preventative check-ins saves you major headaches when credit health matters most for your goals.

Partner With Stearns Bank

You have a vision for your business, and we want to help you achieve it. That’s why we offer a suite of business credit cards that can transform how you manage your expenses and cash flow. 

Whether you want to maximize rewards, simplify tracking, or protect your transactions, we have a card that matches your priorities. Our advisors will guide you in choosing and using the best card for your needs, helping you boost efficiency and build credit.

But we don’t stop there. We also craft complete banking solutions that are tailored to your business goals. Our business banking team has the experience and expertise to help you monitor your finances, make informed decisions, and establish a solid credit foundation for the future. 

We are more than just a bank; we are your partner in success.