While a strong business credit profile opens doors to financing and growth opportunities, building it isn’t always straightforward. Many small business owners aren’t sure where to start and run into roadblocks when they try. For example, you might open a business credit card and make all your payments on time, only to find out you still don’t have business credit a year later.
So, what’s the secret—how can you build business credit efficiently and effectively? In this article, we’re answering 10 questions from the Lili community about building business credit. Plus, learn how Lili’s new BusinessBuild feature is streamlining the path to strong business credit for SMB owners!
Q1: My company has great business credit, but business creditors still ask for my personal credit to secure unsecured business loans. How can I remedy this?
The application requirements for business loans can vary greatly from one lender to the next. Some institutions require personal credit checks and personal guarantees, regardless of how good a business’s credit is. Others don’t. The solution is to seek out business creditors that don’t require your personal credit information. While they can be harder to find, they do exist. The application for Lili’s BusinessBuild card, for example, doesn’t require a personal credit check.
Q2: What is the ‘true’ purpose of an EIN regarding business credit for a sole proprietorship LLC? I pay estimated taxes through the IRS Direct Pay system every month; however, the system will only accept payments under my SSN. How does my business build its credit score, proof of paying taxes, etc., when everything runs through my SSN?
The IRS doesn’t report tax payments to the business credit reporting agencies—even if you pay with an EIN. So, paying all your taxes on time won’t directly help to build your business credit. That said, failure to pay your taxes can result in the filing of a tax lien, which does get reported to business credit bureaus and will hurt your business credit. Further, if someone requests proof that you’ve paid your taxes, your payment receipts from the IRS with your SSN should suffice. As for the true purpose of an EIN when building business credit, many business lenders require applicants to provide their company’s EIN during the application process. If your business doesn’t have one, it will often prevent you from applying and having a chance at building business credit.
Q3: How should a brand-new startup business go about starting to build business credit?
Once a new startup has a bank account and an EIN, the owner should request a free D-U-N-S Number. Dun & Bradstreet (D&B), one of the main business credit reporting agencies, will then add the startup to its database. The next step is to open a tradeline—such as a business loan, a business credit card, or an account with net payment terms—from a company that reports to a business credit reporting agency. Secured business credit cards are good products to start with. While they require a deposit, approval is typically easy to obtain, and issuers may refund the deposit once you’ve made on-time payments for a certain amount of time.
Q4: Can you rebuild business credit once it drops for nonpayment or late payments?
Yes, your business credit is ever-evolving. If you make a late payment or miss one altogether, you can begin to counteract the negative impact by making all of your subsequent payments on time or early. Doing so can help to offset the negative marks by reducing the weight they carry. Time also helps. As late payments move further into the past, they’ll carry less weight until they eventually fall off. For example, trade data drops from Experian’s business credit reports after 36 months.
Q5: I have multiple business accounts from major creditors in good standing, but none are reporting to the business credit reporting agencies. I was told I need a paid Dun & Bradstreet account for them to report. Is that true?
No, you don’t need a paid account with Dun & Bradstreet to build a credit profile with the company. D-U-N-S numbers are free, and companies that report to Dun & Bradstreet will do so automatically. The most important step is getting credit from companies that report to one or more of the main business credit reporting agencies, Dun & Bradstreet, Experian, or Equifax.
Q6: Will I qualify for a business loan even though my LLC has only made a small amount of money and does not have a business credit card?
You may. You typically don’t need a business credit card to qualify for a business loan, per se. However, most business lenders look for stable business revenue over time, along with established business and/or personal credit. If you’re having trouble getting approved, you may want to start with a business credit product that’s easier to qualify for, such as a secured credit card or net payment terms from a supplier that already trusts you.
Q7: I have no credit history as a business, but I do have a Lili bank account and a D-U-N-S number. Should a net/vendor account or the Lili secured card be my next step?
Both are good options, as each can allow you to establish a tradeline on one of your business credit reports. However, the Lili BusinessBuild Program provides comprehensive support for building your Dun & Bradstreet business credit profile. You get the secured business credit card account, along with 24/7 access to your Dun & Bradstreet credit profile, real-time credit alerts, and credit building training. If you get net payment terms from a vendor or supplier, you’ll need to ensure they report to a business credit reporting agency and figure out how to track the progress yourself.
Q8: What is a net-10?
Net-10 refers to a net-10 payment agreement, which allows the payor 10 days to complete the payment to the payee. You may more commonly come across net-15, net-30, net-60, and net-90 terms. Accepting net payment terms from a business can allow you to establish a tradeline, as you’re being trusted to pay the amount that you owe at a later date. However, it’ll only help your business credit if the company offering the net terms reports to a business credit reporting agency.
Q9: I have an LLC and an EIN. Should I also get a D-U-N-S Number?
A D-U-N-S number isn’t required to do business, but it can be beneficial. Once you get one, D&B establishes a Live Business Identity for your business in the D&B Data Cloud, which is attached to a business credit file. From there, you can build a public record that helps organizations gauge your company’s risk and financial health. A positive record can potentially grant you access to opportunities, such as loans, business partnerships, and investments.
Q10: What is the cost of Lili’s BusinessBuild Program?
Under the current promotion, the first month of the BusinessBuild program is free, followed by a 40% discount for the next three months. After that, the fee is $30 per month.
Streamline Your Path to Strong Business Credit With Lili and D&B
Lili knows firsthand how difficult and confusing it can be to build business credit. To simplify the process, we’ve collaborated with Dun & Bradstreet to launch the BusinessBuild Program. You can now build credit as you make your normal business purchases using your Lili checking account and the secured Lili BusinessBuild Credit Card. You also get 24/7 access to your D&B business credit score, real-time alerts when your profile or scores change, and credit-building trainings. No more being left in the dark, wondering if the steps you’re taking are actually leading to business credit growth—we’ll keep you informed every step of the way.
