To qualify for a credit card, mortgage or personal loan at a good interest rate, you must have a strong personal credit score. This probably doesn’t come as a surprise. 

The same is true for business credit. In order to borrow money for your business, through business loans, credit cards, and lines of credit, you’ll need to maintain a strong business credit score. If you’re growing a small business, business credit can be particularly crucial, since you need access to capital, to expand your operations, and increase cash flow.

There are several different credit scores used by lenders, including the Dun & Bradstreet Paydex score, the Intelliscore Plus from Experian, the Business Credit Risk Score from Equifax, and the Small Business Scoring Service from FICO. Most of these scores are designed to help predict whether your business will pay creditors, suppliers and vendors on time.

Of course, to build a strong business credit score, you need to actually use business credit. This means you need to qualify for business credit in the first place. How do you get started with business credit? 

By following the tips listed below, you’ll increase your chances of succesfully qualifying for business credit accounts, allowing you to build an excellent business credit score, and gain access to the funds you need to grow your company. Let’s get started. 

1. Have A Business Address

When you apply for business credit, the lender will check the address listed on your application, often by using Google Maps, or other sophisticated address matching software. Why do they care where your business is located?

Simply put, lenders want to confirm that you’re a legitimate business. One of the ways they do this is by making sure that you have a physical address in a business location. If you use your house address, this raises questions about the true status of your company.

This might seem unfair. After all, there are many home-based businesses, or new companies which are getting off the ground, and don’t want to take on the considerable expenses of office space. 

However, lenders often prefer to see that a business occupies some sort of traditional office space – they see it as a sign you’re serious and established. There is little you can do to change these rules – instead, it is best to find ways to adapt. 

Fortunately, some simple, low cost options are available. You can sign up for a service like Regus or Davinci, which offers a virtual physical office address for a monthly fee. You might also want to speak with a coworking company, such as WeWork (or a smaller local coworking space), and see whether they’re able to offer a virtual address (for a fee). 

Many business owners try using post office boxes, as their business address. This usually doesn’t work, since, as mentioned, the software informs them that a post office address is being used, and this is not considered a business address.

2. Create A Business Website & Email Address

Lenders also check as to whether you have an official business website, and an email address to accompany it. For example, if your business is named ABC Toys, you might have a website called abctoys dot com. If a dot com domain is taken, you can try using .co, .biz, us, or many other extensions. This domain should clearly convey the functions and purpose of your business, and of course include your business contact information. 

This goes beyond applying for business credit. Today, your website is essentially your storefront/showroom. Why wouldn’t you want to convey the best impression possible online? Investing in a good website is critical.    

You should also create a business email address, which matches your website. Using a Gmail or Yahoo account increases the chances of your credit application being denied, as it conveys a less serious impression to lenders. Many lenders use software, which makes automatic decisions by looking at things like your website, email and so on.

So, if you run ABC Toys, and your name is Sam, you’ll want to use Sam @ abctoys dot com instead of abcdtoyssam @ gmail dot com. 

3. Set Up A Business Phone Number & Fax

When you are an early stage business, it is fairly common to use your personal number as a business phone number. As far as fax, you might not even bother with setting one up.

If you’re planning on applying for business credit, having an official business phone number and fax is important. Just as with business email addresses and websites, having an official business phone number and fax is seen as an indication of professionalism. You can sign up with a service like Ring Central or Grasshopper for phone and/or fax service, and pay a monthly fee.

4. List Your Business Phone Number With 411

If you’re under the age of 30, you’re probably not too familiar with the 411 phone number. 411 is a directory, which people used to call when they could not find a phone number (say, for a particular business), and so needed help from an operator. Today, most of us use Google instead.

However, the 411 directory still exists, and for some reason, business lenders still refer to it, as a sign of whether a business is real. If your business phone number is listed in 411, that increases your chances of being approved for business credit.

You can’t directly contact 411, and ask them to list your phone number. Instead, you’ll need to use a service like listyourself.net, which allows you to have your business listed in various directories. If a lender searches these directories for your phone number, and finds it listed, this increases your chances of succesful approval. 

5.  Register for a DUNS Number

Dunn & Bradstreet is a large multinational company, which provides data and analytics regarding businesses. In many ways, Dunn and Bradstreet functions like Experian, Equifax and other credit bureaus you might be familiar with, who generate credit reports and scores for individuals.

Dunn & Bradstreet have created a system called the Dun & Bradstreet Data Universal Number System (DUNS), which issues a 9 digit number (known as a DUNS number). When you apply for business credit, besides requesting your EIN, many lenders will want to know your DUNS number. 

This is because your DUNS number is used to maintain a business credit file on your company, providing information to potential suppliers, lenders and business partners, as to whether your company is trustworthy. As you start building business credit, your on-time payments of business loans, credit cards and directly to vendors, will help you build a strong business credit score, which in turn increases the chances of being approved by other lenders.

You aren’t automatically issued a DUNS number. Rather, you have to create one. This can be done for free by clicking this link. Please note that you’ll need to provide basic information about your business, including your legal business name, business address and phone number, as well as your position within the business, and the number of employees.

Another advantage of a DUNS number is that it allows you to build stronger business credit, through your suppliers. Suppose that your business hires a digital marketing agency, to generate Facebook and Instagram ads, to drive more business. You can arrange for the marketing agency to report the on-time payments of invoices to credit bureaus, and thus further boost your business credit profile. 

The Final Word

Building strong business credit offers many important advantages. It offers you access to capital to grow your business, and allows you to separate your business and personal credit (thus limiting your financial risk). 

However, as with all financial matters, it is important that you understand the basic strategies required to build a strong business credit score. By following the steps outlined above, you’ll steadily build business credit, allowing you to better fund your business, grow, serve your customers, and ultimately prosper.

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