How To Build Business Credit Without A Personal Guarantee?

Your business credit defines your business’s capability to borrow money for tomorrow’s needs. Especially, the investors and the creditors will track the business credit score, before they put money in your business. Clearly, they would want to know about the health of your business. And, there is no better parameter than the credit score of the business. If you don’t have a business credit, then you might be asking yourself how to build business credit? Or how to build business credit fast? Well, this article is going to answer both of these questions. By, the end of this article you will have a thorough understanding of how to establish business credit.

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If you want to build business credit fast without any personal guarantee, the first thing you should do is name your business appropriately. The business name should reflect the nature of the business. The creditors or the investors should be able to identify the business with the business name. This definitely works in a high-risk industry. A good example can be cited in this case. For example, you have a real estate business. Something Joe Real Estate LLC will be much more appropriate than Joe Business Developers LLC.

Your next step should be the incorporation of a business. Through incorporation, business legally gets separated from the owner. After incorporation, the business and the proprietor will be recognized as a separate entity. As a result, the personal credit will get separated from the business credit. That means your credit score will be separate from the business. This also means that you can generate business credit history, without even personal guarantee. It could be said that legalization of business through incorporation is the most important step for developing a business credit score. Even though incorporation might not be an easy task, and you might have to undergo a number of legal formalities. Once the business is incorporated it will be identified as “Limited” or even “Inc”, prefixed to the business names. Once the business is incorporated, you will receive an EIN (Employer Identification Number) which will identify your business. While incorporating, it is important that you select the property entity structure, otherwise, it will impact the taxation.

The next step will be to obtain business or trade license. A business license will legally verify your business. Once the business license is obtained, once can start operating the incorporated business. The license is given for a particular region. It might be a city, state or a country. It is important to note that, post incorporation of business it is mandatory to obtain a business license in order to commence the business. After getting the license, you have to select the applicable codes for the business. Again, this identifies your business with a specific industry. Often it is referred to as SIC & NAICS codes.

As the business has been separated from the owner through incorporation, it needs to have its own account. This is also known as a business bank account. A business bank account will determine the creditworthiness of the business. The business account should have a healthy balance, in order to get a healthy credit rating. Now get a DUNS (DUN and Bradstreet) number, which will be used by your business while you apply for a business credit without a personal guarantee. DUN number uniquely identifies the company and provides important insight into the business. DUN number is extremely helpful for building business credit, even without a personal guarantee.

It might take some time to get the DUNS number. However, once the DUNS number is generated, update your business’s profile by registering with iUpdate. All the existing trade references should be added to the business profile in iUpdate, as all the information updated in iUpdate will be accessed by DUNs. Once you have a minimum of three trade lines associated with your DUNS number, your Paydex score will be generated. Post-generation of Paydex number, you can start applying for business credit while your business credit history gets generated in the background. The best part is, you can get credit or your credit history get generated even with a personal guarantee.