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Once you have started your business and decided get some new business credit cards, there are a few steps that you have to take. The procedure is a bit complicated, but is also nonetheless necessary for establishing business credit.
The business must first be registered with the Federal government, and given and EIN. This is the business equivalent of a social security number and creates an identity for the credit tracking agencies to follow. An EIN requires the formation of either a corporation, or an LLC; it cannot be given to a business held in sole proprietorship. You must then obtain all the necessary licenses and permits for the business, open a bank account in the business’s name, and create a separate phone line specific for the use of the business. Essentially, all the same criteria that apply to the identification of a personal record apply to a business as well.
Having done this, you must then open business credit files with the three credit report agencies that are designed for business: Dun & Bradstreet, Experian, and Small Business Financial Exchange (SBFE). SBFE is owned by Equifax, and is used primarily by business lenders and banks. Dun & Bradstreet is used by landlords, vendors, and other companies that extend Net Term credit. Experian is used by equipment lessors, business credit lines and business credit cards. To apply for a new business credit card you will first need accounts with the three agencies. There are a number of independent agencies that will help you do this online, and for a reasonable cost. The process take approximately 120 days.
After this, you can then start hunting for your credit cards. Initially this is a challenge because, of the approximately 500 business credit cards out there, only about 60 will approve new business credit cards and extend credit independently of your personal credit. This may seem annoying at first, but the patience will be well worth it.
Unlike personal credit, which assigns good credit scores based on predictability and timely payments, business credit is based more on volume. The scores of the report agencies are based primarily on profits, business size and the number of employees. Business credit is not built the same way as personal credit. But don’t be discouraged by this, simply follow sound business practices and you will reap the rewards in due time.
