How Long Does it Take to Build Business Credit?

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If you are a business owner looking to get financing for your new business, you might be wondering how long it takes to build business credit. The good news is that it doesn’t take too long. There are a number of steps you can take to speed up the process.

First, you should start by incorporating your business. This is a legal process that sets up the business as an entity that is independent of you, the owner. Many creditors will require that you register the business before they will extend credit to it. You will then need to obtain an employer identification number (EIN) from the IRS. When you get the EIN, you will then be able to apply for business credit cards.

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Using credit for your business is a good idea, but you will need to make sure that you pay it off on time. The best way to do this is to make regular payments on all of your bills, including rent, leases, trade lines, and credit cards. By making your payments on time, you will help to boost your business’s credit score.

Once your business is fully up and running, you should begin establishing a history of timely payments. You can do this by signing up for a business checking account and submitting your information to at least three business credit reporting bureaus.

Your business’s credit report can be a key tool when you are trying to secure loans, insurance, or other types of business services. It will also help you to get better rates on these services. For instance, you will likely be offered lower rates on insurance if you have a good business credit rating.

Another way to build business credit is to establish vendor relationships. These can be the key to getting a line of credit and references from banks. To do this, you will need to build a reputation as a dependable company. This may be a six-month to year-long process.

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Lastly, you will need to consider your personal credit. Although not a requirement, many lenders will ask you for a personal guarantee. You can use your EIN instead of your SSN, but you should keep your personal credit separate from your business.

Depending on your business structure, the process will vary. For example, some states don’t require you to register your business, while others will require that you obtain an employer identification number. However, if you are a sole proprietor, you will still need to obtain a local business license. Generally, establishing a good business credit rating is important for securing low interest rates and obtaining loans.

Regardless of how long it takes to build business credit, the benefits are well worth the wait. The higher your score, the more reliable you are with lenders, and the more opportunities you have to expand your business. As a result, you will be able to access loans at low interest rates, and you can also avoid personal liability if you have a good business credit record.

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