Why You Should Start Building Business Credit Before 2025

A good business credit score can do wonders for your growing business. It can help you secure funding, from lines of credit to business loans and trade lines with suppliers and vendors.

A strong credit profile can also boost your business’s credibility. It demonstrates that your venture is a reliable borrower, allowing it to get better terms like lower interest rates and flexible repayment schedules.

Unfortunately, building business credit is not easy. It takes time and dedication, so experts recommend new entrepreneurs to start as early as possible.

What is Business Credit?

Business credit scores measure a business’s creditworthiness. Lenders and suppliers typically use business credit to evaluate whether or not to extend credit to a company.

These scores are determined by a business’s payment history, outstanding debt, credit utilization score, and length of credit history. The higher the score is, the more creditworthy a business will be in the eyes of a lender.

Three primary agencies collect and produce business credit reports: Dun & Bradstreet, Equifax, and Experian. Each has different scoring models to evaluate a business’s creditworthiness.

Dun & Bradstreet uses the Paydex score, failure score, and delinquency score models to assess a business’s credit history. Equifax uses the payment index, the credit risk score, and the business failure score.

Lastly, Experian has two scoring models: the business credit score and the financial stability risk rating.

So, what is considered a good business credit score? Since credit reporting agencies use varying scoring models, there’s no universal “good” score. However, Experian says a score of 75 or above is considered “excellent.”

Lenders view businesses with this credit score of 75 as low-risk borrowers.

When Should I Start Building Business Credit?

Good business credit scores are not built overnight. It takes time and patience to build and establish a strong credit profile. That said, you should start as early as you can.

If you plan to launch your operations in 2025, consider building business credit before the year ends. Here’s why:

Establishes an extensive credit history.

Small businesses often have difficulty securing credit because they haven’t been in the business long enough to have an extensive credit history.

However, if you start building credit months before your operation, you can record enough transactions to establish your business’s borrowing and repayment patterns.

You can achieve this by getting a business credit card and using it to pay for your startup expenses. Ensure you pay off the balance in full each month. This way, your business will start 2025 with a positive payment record.

Early access to funding.

Building credit early will also help your venture get early access to funding. Although most lenders only extend credit to businesses at least three years old, exceptions are often made for businesses with a solid credit profile.

Opportunity to get better deals.

Building business credit before 2025 will also give you leverage when negotiating better rates and payment terms. Lenders are more willing to provide low interest rates and flexible payment schedules to businesses with solid credit scores.

If your business has a relatively good credit history, it can get better credit card or loan terms.

How to Build Business Credit Fast

To build business credit fast, you must follow these steps:

Incorporate your business.

The first step to building business credit is incorporation. You can’t develop a business credit profile if your business is not incorporated.

You can incorporate your venture as a limited liability company (LLC) or corporation, depending on your needs and goals. However, we recommend forming an LLC for more tax savings.

LLCs have pass-through tax status, which can help you avoid double taxation. These entities are also easier to form and maintain than corporations.

Obtain an employer identification number (EIN).

Once you’ve incorporated your business, you must obtain a nine-digit employer identification number (EIN) from the IRS.

EINs are prerequisites for various activities such as filing taxes, opening business bank accounts, and hiring employees. Since business credit scores are closely linked to EINs, you won’t be able to build one without it.

But the good news is that EINs are free. You can get them from the IRS website without paying a cent.

Register for a DUNS number.

A Dun & Bradstreet number, or a DUNS number, is another nine-digit code you’ll need to build business credit fast. It’s the primary identifier lenders use to check your business’s credit score.

Do you need to apply for a credit number with Experian and Equifax? Not entirely. These two agencies will start profiles for your business based on the borrowing information that lenders report.

So, if your business works with a credit card company that submits borrowing information to Experian, you’ll automatically have a profile on their records.

Open a business bank account.

A business bank account is one of the pillars of strong business credit. Opening one will demonstrate to potential lenders that your business has a stable and organized financial structure.

Furthermore, it will provide you access to loans and credit lines designed for small businesses.

These four factors will lay the foundation for your business credit score.

Kickstart the New Year With Solid Business Credit

Building a strong business credit profile is not just a task, it’s a crucial step in securing funding and fueling your business’s growth. A good score will not only help your company get better lines of credit and loan terms but also significantly boost your business’s credibility with potential investors.

While developing an excellent credit history takes time, starting the process early will give your business the headstart it needs to thrive in a competitive market. If you start building business credit before the year ends, your venture will start 2025 on solid footing.

Kickstart the new year right, and let NCH assist you in building business credit.

NCH specializes in LLC formation and business credit building. Our team will help you form your LLC and build its credit profile. We’ll ensure your LLC is structured for success and has an excellent business credit score.

To learn more, visit our website here or call us at 1-800-508-1729 to schedule a consultation with one of our specialists.

Disclaimer: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.