Business credit is one of those things that sounds complicated and turns out to be simpler than you'd expect — if you start early and do things right. I spent years mixing personal and business expenses because I thought separating them was too much hassle. When I finally needed a business loan for my second company, I had a business with no credit history and personal credit that had taken hits during a slow period. Getting approved was harder than it needed to be. Don't make my mistake.
The goal is straightforward: build a business credit profile that's separate from your personal credit, so that eventually the business can borrow money, get credit cards, and access financing on its own merits, regardless of what's happening in your personal financial life.
Step 1: Separate Everything
You need a business bank account, a business credit card, and a business phone number — all in the business's name. Every transaction that flows through these accounts builds your business's financial identity. Every transaction that flows through your personal accounts is invisible to business credit bureaus.
Get an EIN from the IRS (free, five minutes). Use it when opening bank accounts, applying for credit, and dealing with vendors. The EIN is the identifier that ties your business's credit activity together.
Step 2: Start with Vendor Credit
The easiest business credit to get when you're starting from zero is vendor credit — trade credit from suppliers who let you pay on Net 30 terms. Many vendors will extend credit to a new business with no credit history if you ask, especially if you have a strong business plan or existing relationships in the industry.
Once you establish these accounts and pay them on time, they get reported to business credit bureaus. This is how your business starts building its own credit history. Without these trade lines, you have nothing to point to when a lender asks about your business credit history.