Establishing good business credit is one of the best things entrepreneurs and business leaders can do for their organizations. Often, business credit is the one thing standing in between small businesses or startups and more access to capital. With a strong business credit score, it’s easier to secure loans and obtain favorable payment terms with business credit vendors and suppliers.
In a time when cash flow is at the top of every business leader’s mind, business credit scores can make a world of difference. Net 30, Net 60, and Net 90 payment terms can help businesses obtain raw materials and other key supplies before making revenue to cover those costs. And of course, business loans can unlock a new level of capital, enabling strategic investments and creating a more liquid environment for businesses.
So, if business credit is so important, how can you build it? We’ll make it easy to understand what business credit is and how to start building it. We even have a list of vendors to build business credit with so you can get started right away.
What is Business Credit?
Business credit functions very similarly to personal credit; as businesses continue to get access to credit in the forms of trade accounts, loans, or business credit cards, their credit score will move up and down. When payments toward outstanding debt are made on time and in accordance with contractual agreements, business credit scores rise. On the other hand, if a business is continuously making late payments or taking on more debt than it can manage, the business’s credit score will fall.
How to Check Business Credit Scores
There are many different credit reporting bureaus that exist in the business world. When a business wants to get a snapshot of its own credit score and see the matching credit report, it can pay one of these bureaus to send the information over. For lenders and business credit vendors that are conducting due diligence before working with a new business client, these reports can also be accessed through business credit reporting bureaus.
Different Business Credit Reports and Scores
The major credit reporting bureaus that businesses rely on are Dun & Bradstreet, Equifax, Experian, and Creditsafe. Each of these entities has its own database of credit information, making it easy to credit scores for specific businesses. Vendors that report business credit information submit customer payment history data to the credit bureaus, providing even more detailed context surrounding the financial standing of an organization.
The credit bureaus below consider payment history and other information to determine business credit scores and risk factors. In turn, these credit scores inform business credit vendors, lenders, and external stakeholders about any credit issues and provide suggested credit limits for specific businesses.
Dun & Bradstreet (D&B)
One of the most well-known business credit reporting entities is Dun & Bradstreet (D&B). D&B uses proprietary analytical tools to publish credit scores and rating reports for all businesses registered within its system. The insights from D&B help vendors decide whether or not to offer extended payment terms to new clients and make it easy to monitor existing trade accounts with long-standing customers.
To measure a company’s payment history, the D&B PAYDEX is a popular tool. This score, which can range from 1-100 categorizes businesses into three different categories based on risk. A high score of 80-100 means a business is at low risk of submitting payments late; a score of 50-79 indicates moderate risk; and a low score of 1-49 signifies high-risk businesses that are likely to manage debt poorly.
D&B also provides business credit vendors with maximum credit recommendations, a Delinquency Predictor Score (DPS), and a D&B Failure Score.
Equifax
When working with vendors to build business credit, they’ll likely report your payment history to Equifax. Equifax’s business credit report for small businesses contains a credit risk score, payment index score, credit utilization percentage, credit breakdowns, and any other risks such as bankruptcy or liens. The credit risk score on each report ranges from 101-992. A score of 992 is the best possible score for businesses; most businesses won’t hit this benchmark, but the higher the better.
Experian
Factoring in the number of trade accounts and lines of credit, business payment history, length of time in business, public record results, and more, Experien’s business credit scores fall on a scale from 0-100. 100 is the best credit score a business can get, so the closer your organization’s score is to that, the more confident business credit vendors will feel when partnering with you.
Creditsafe
Creditsafe, unlike the other bureaus on this list, is a worldwide entity that creates and sells business credit reports for business leaders all over the world. Similar to Experian, Creditsafe’s credit score range is 0-100, with 100 being a stellar score. As scores climb higher, the chances of default or bankruptcy are lower.
How to Establish Business Credit
Building business credit doesn’t happen overnight, but there are a few things new businesses and startups can do if they want to position themselves to achieve the best business credit standing possible.
- Create a legal business entity such as an LLC or a corporation. A sole proprietorship is an option for new businesses, but it doesn’t always bode well for organizations that want to work with business credit vendors. Instead, by establishing a separate legal entity, your organization will be seen as its own business with its own score, separating your personal finances from your business finances. Be sure to register your business with the necessary authorities and apply for an Employer Identification Number (EIN) with the IRS.
- Open a business bank account to manage transactions and track revenue and expenses. Obtaining business financing is simpler when your organization has its own business bank account that is not tied to your personal accounts.
- Request a DUNS number through Dun & Bradstreet. This can be done online, and it is free of charge. For other credit bureaus, no action is necessary. Your business credit profiles will be initiated once the business information is reported by vendors for business credit purposes.
- Secure a business credit card. Not only is this a great way to get access to additional funds, but it will help build business credit over time. Be sure to look for a card that fits your needs, has a low APR, and provides favorable rewards. The card limit may be low at first, but with healthy financial management practices, accessing credit limit increases is straightforward.
- Partner with business credit vendors that offer net 30 payment terms or other trade accounts to customers. Working with vendors to build business credit is one of the most effective ways to boost business credit scores. When entering into agreements with vendors that report business credit, be sure to pay all outstanding invoices on time. If the accounts payable team makes a late payment, it could negatively impact the business’s credit score.
Top Vendors That Report Business Credit
For new business owners, building business credit can seem elusive and confusing, but working with vendors that report business credit is simpler than it seems. Many business credit vendors offer net 30 terms to new clients without credit checks or qualifying requirements. Even if credit checks or other qualifying requirements are needed, selecting vendors that offer extended payment terms isn’t hard. Here’s a list of vendors to build business credit today:
Uline
Uline provides a wide range of shipping and packaging solutions to support businesses, offering competitive prices, fast delivery, and excellent customer service. New Uline customers can apply for a net 30 trade account online or by phone. Uline is a business credit vendor that not only conducts credit checks for new applicants but also reports payment history to Experian and D&B.
Quill
Office furniture, printers, electronics, and other supplies can have a high price tag. Luckily, Quill gives new clients net 30 approvals within 24 hours of making their first purchase. There is a minimum order amount of $100, but with the products sold at Quill, the threshold is not hard to reach.
Home Depot
Home Depot serves as a one-stop shop for businesses looking for construction, home improvement, and maintenance supplies, providing competitive pricing, extensive product selection, and expert advice. The Home Depot net 30 account, also called the Home Depot commercial account, is a helpful financing option for qualifying businesses. The retail giant offers a 2% discount to businesses that settle their invoices within 20 days and reports credit activity to all major bureaus in the U.S.
Grainger
Grainger offers a comprehensive range of maintenance, repair, and operating supplies, along with procurement solutions and technical support to help businesses streamline their operations. Securing a trade account with Grainger requires a bit of extra legwork, but once the upfront steps of talking to a sales representative and registering online are complete, it is an accessible way to build business credit.
eCredable
For businesses struggling to secure trade accounts, eCredable provides an alternative solution. This paid service allows businesses to add their bill payments to credit reports. By utilizing eCredable’s services, businesses can supplement their credit reports with additional positive payment data, potentially improving their access to credit and strengthening their overall business creditworthiness.
Crown Office Supplies
If a business is 30 days old or older and doesn’t have a history of negative credit marks, Crown Office Supplies will approve net 30 accounts. There is an annual fee of $99, but with the range of office supplies available and the potential business credit boost, the fee is worthwhile.
Wise Business Plans
For startups, Wise Business Plans can help secure investor funding, optimize production plans, and even support the creation of logos and websites. All of these services can be accessed with net 30 payment terms, as long as businesses have been operational for 30 days or more and are willing to pay the annual $99 fee.
Costco
Costco is a well-known wholesaler in the U.S.; for everything from office snacks to furniture and electronics, Costco has a great selection. Its net 30 accounts are a bit more difficult to qualify for than other options on this list of vendors for business credit, but it’s worth applying for.
Creative Analytics
This digital marketing and strategy firm has multiple business accounts available to business clients. A Pay by Invoice account with net 30 terms is a great option for businesses looking for logo design, WordPress website development, and email marketing support.
NAMYNOT
Similar to Creative Analytics, NAMYNOT offers a wide range of digital marketing services such as SEO, content creation, and lead generation to its clients. With up to $10,000 available in “buy now, pay later” agreements, NAMYNOT makes it easy to build business credit over time.
It’s Not Just Building Business Credit – Don’t Forget to Maintain It!
Building business credit is a journey that takes time. By working with business credit vendors that report credit information to the major credit bureaus, businesses can improve their credit scores even if they are just starting out. There are many vendors out there that offer favorable trade accounts to new clients, and some even offer these accounts to clients who don’t have an existing credit report.
Once credit scores have been established, the work is not over. Just like with a personal credit score, business credit scores can fluctuate based on payment history and other factors. Maintaining favorable business credit scores should be a top priority, and ensuring a smooth accounts payable process is one of the best ways to do that.
The AP team is responsible for paying all invoices and clearing short-term debts. By automating AP tasks with digital tools and software solutions like Nanonets to help manage invoices, automate approval workflows, conduct invoice matching, and send EDI payments, your organization will benefit from early payment discounts. It may seem complex to build your business credit, but with strong AP practices in place and the right tools at your organization’s discretion, it’s easy to achieve your business credit score goals.
