Small business entrepreneurs, both new and established, are often on the lookout for ways to obtain funding and credit. Establishing a strong business credit profile with diverse accounts early on can help make your immediate and future business plans a success, from startup costs to new expansion strategies. If your company is new, you may not be thinking about small business financing just yet, but that day may come.
What exactly is business credit?
A business’s creditworthiness is determined by a number of factors.
Companies, investors, and financial institutions utilize business credit to decide whether or not a firm is a good prospect for lending money to or doing business with. Trade references are measurables used to determine this information.
What is a trade references?
A Trade Reference is a source that supplies commercial payment information to creditors. A “Payment Experience,” or “Trade Experience,” is a record of such payment information that creditors receive from a Trade Reference on its business customer. Payment Experiences can positively or negatively impact a company’s business credit scores. Some Trade Providers automatically provide commercial payment information. Business owners can also manually submit Trade References to creditors like Dun & Bradstreet for verification and potential acceptance. You can request a free 9 digit DUNS number.
What Exactly Is a DUN S Number?
It is used around the world to identify businesses and obtain information about them. In addition to firmographic data (company name, address, phone number, etc), corporate family relationships (headquarters, branches, subsidiaries, etc.), and scores and ratings that assess different financial health indicators, a DUNS Number is used to identify a company’s credit file with Dun & Bradstreet. Combined, this profile of information is referred to as the Dun & Bradstreet Live Business Identity (D&B Live Business Identity). You can get a business credit report from potential partners and lenders using your DUN number or other identifiers for your company.
How Do You Build Your Business Credit?
1. Formalize Your Company as a Separate Entity
2. Apply for a Dun & Bradstreet D-U-N-S® Number
3. Obtain an Employer Identification Number(EIN) from the IRS
4. Open a Business Bank Account.
5. Make timely payments.
6. Request that vendors provide Dun & Bradstreet with trade references.
7. Keep track of your company’s credit scores and ratings.
There are many ways to approach this process and if you are looking to execute this process within the fastest timeframe, you may want to speak with a professional, or partner with a business consulting firm. If you are unsure if you should partner with a consultant read “Is Business Consulting The Answer?” for additional insight. The process of building your business credit could be expedited with a strong plan.