Business Credit Building Blocks

Once a business owner makes the wise decision to focus on building business credit, the goals are to do everything possible to establish the business as a separate legal entity and then begin taking steps to earn a positive business credit history.

Acquire an Employer Identification Number (EIN): This is the first step a business owner needs to take in order to begin to separate the business from the owner’s personal finances. Just like a Social Security number is used to track and report personal tax and credit information, the EIN is used to track and report business tax and credit information. In order to receive an EIN, a business owner must complete and submit an Application for Employer Identification Number (IRS Form SS-4).

Establish Physical Business Address and Phone Number: It is also critical that you maintain a separate business address and phone number. Your business address must be a distinct physical location with a postal address that includes a full street name and number. A Post Office (P.O.) box will not work because it is not considered a physically approachable existence. It is also imperative that you maintain a business telephone line that is separate from your personal or home phone. This number can be a traditional land line or a cellular phone number, as long as the outgoing message maintains that this is a business line. It is also important to make sure that your business phone number is listed in the Yellow Pages and other Business 411 directories and not the personal sections of those databases.

Verify Accuracy of Business Information: It is also very important to make sure that your official business name, phone number, and address is being reported accurately by all of the various state and federal agencies, including the State your are incorporated in, the IRS, the financial institution that oversees your business checking and savings accounts, and any 411 or Directory Assistance databases that you subscribe to. It is also important to be sure that your pertinent business information is correct on all of your utility bills. Inconsistent or conflicting information in any of these databases can create an error message and automatic rejection when applying for business credit, so it is imperative that all of your business information is correct and current. For example, if your business name is “A-1 Accounting Inc.” and you see it reported as “A1 Accounting” or “A-1 Accountants Inc.”, you must immediately call the reporting agency to have the error corrected. Also, your business address must be identical every time it is reported. For example, “Suite 1150” and “#1150” are identical and should be corrected to ensure consistency.

The following agencies should be contacted in order to verify correct information is on file for your business:

• Secretary of State / Corporation Commission: The Secretary of State in the state that you are incorporated in should have all the correct information for your business. All of this information is public record, so it should be easy to verify your information.

   

• Internal Revenue Service (IRS): You (or your CPA) can contact the IRS to verify and update the information that is on record for your business. If your address changes or is reported incorrectly, you can submit a Change of Address (IRS Form 8822) to make the necessary changes.

   

• U.S. Post Office: If your address changes or is being reported incorrectly by the U.S. Post Office, you can correct this information by using their Online Mover’s Guide.

   

• Directory/411 Assistance: Check all Directory/411 Assistance records to verify that your information is being reported correctly. If you find an error, you should contact Customer Service to have that information corrected.

   

• Social Security Administration: If you need to update your business information with the Social Security Administration, you can use the online Social Security Address Change Form on their website.

   

Acquire a Business License:

Depending on where you operate your business, there are a wide array of required business licenses that you may be required to apply for. Make sure you have covered all your bases and have copies of your licenses ready to submit with all business credit and loan applications.

 

Open a Business Checking Account:

As soon as you have established an EIN and a permanent business address and phone number, you should research the financial institutions in your area that provide business checking. Once you find a bank with a location that is convenient for you and a Business Checking Account program that provides for all your needs, you should apply for an account immediately.

 

Apply for a DUNS Number: A Dun & Bradstreet DUNS number is a nine-digit unique number that is associated with your business and is used to track business credit and tax information, much like a Social Security Number is used to track personal credit and tax information. Having a DUNS number not only enhances the credibility of your business, it also allows potential customers, suppliers, and lenders to evaluate your business performance based on your credit history.

Consider Incorporating Your Business: Establishing your business as a Corporation or an Limited Liability Company is another good way to enhance the way your business is perceived. When a customer or lender sees “Inc.” at the end of a company name, this is an indication that the business is being handled in serious and professional way.

Each of these steps is one piece of the complex puzzle that is required by commercial lenders. If business owners have the foresight and take the time to complete these steps, it will greatly improve their chances of being approved for business credit.