Hopefully, you’ve read Part 1 and Part 2 of this series on credit. If you’ve made it this far, you already know what it is and how to start repairing or building personal credit from scratch. You also probably got the gist that, early on in business ownership, your business credit and lendability are closely tied to your personal credit and finances.
However, you can eventually separate your personal finances from your business. Your business can (and should) have its own financial identity. It can have a credit score of its own, and strong business credit can open the door to better financing terms, lower insurance rates, stronger vendor relationships, and the ability to scale without tying everything to your personal finances.
In this article, I’ll go over how to start building business credit, what lenders are looking for, how to use credit as a growth tool, and real ways you can leverage credit to expand your opportunities. This is the level-up conversation, and to be upfront, I AM LEARNING THIS WITH YOU!
Starting Foundation
Business credit isn’t automatic. Just because you open an LLC doesn’t mean you immediately start building credit. You also need to demonstrate that your business is more than just a side hustle. Lenders want to know that you’re running a legitimate business, not just filtering personal expenses through a company name and checking account.
Choose Your Business Structure
Selecting the correct type of business entity matters. Some of the most common are Sole Proprietorship, LLC, S-Corp, and C-Corp.
Sole Proprietorship
Definition: An unincorporated business owned and run by one person. There is no legal separation between the owner and the company.
Pros: Easiest and cheapest to start. Very little paperwork. All profits flow straight to the owner’s personal tax return (Schedule C).
Cons: No liability protection, which means your personal assets (home, savings, car) are at risk if the business is sued or goes into debt. It’s also more challenging to establish business credit because lenders often view the owner and the company as the same.
Why choose it: In my opinion, DON’T. You never want to create a business that you can’t eventually separate from your personal finances. Otherwise, it’s just a hobby or another job, but for some people, their business is their job, and they will always be the sole worker.
LLC (Limited Liability Company)
Definition: A legal entity separate from its owner(s). An LLC is created by filing paperwork with the state. It can have one owner (member) or many.
A PLLC (Professional LLC) is similar to an LLC, but it’s specifically for licensed professionals like doctors, lawyers, and physician assistants (like me and many of you). It provides liability protection for business debts but doesn’t shield you from malpractice claims tied to your profession.
Pros: Provides liability protection, which means business creditors can’t come after your personal assets if the business fails. Business bankruptcy is separate from personal bankruptcy. LLCs are relatively easy to maintain and recognized by lenders and vendors as legitimate businesses. They can also have tax advantages, such as an LLC that can be taxed as a sole proprietorship, a partnership, or even an S-Corporation. (This is next-level stuff, but important once you’re in the trenches.)
Cons: Requires paperwork and fees to set up. In Texas, filing costs around $300, but hiring a lawyer can increase the cost to a range of $1,200 to $1,500. Some states also charge annual fees. Texas doesn’t, but if you choose to pay for a professional registered agent, the cost can be approximately $300/year.
Why choose it: Ideal for small-to-medium businesses that want liability protection and credibility without the complexity of a corporation. For most entrepreneurs, this is the best place to start.
S-Corp
Definition: A corporation formed by filing incorporation documents with your state. Corporations have shareholders, directors, and officers (even if these roles are held by a single person in a small company). An S-Corp is a corporation that has elected a special tax status under Subchapter “S” of the IRS code. Income is “passed through” and taxed at the owner’s personal tax rate, which avoids federal corporate income tax.
Pros: Offers liability protection and keeps personal assets separate. Also comes with potential tax savings. For example, owners can pay themselves a “reasonable salary” and then take additional profits as distributions, which aren’t subject to self-employment tax. Dr. Slater dives into these tax benefits for high-income earners in this article.
Cons: Stricter rules: limited to 100 shareholders, and ownership is restricted to individuals (other corporations can’t own an S-Corp). You also can’t underpay yourself just to dodge taxes, because the IRS requires a “reasonable” salary and has established standards for what that means.
Why choose it: Great option if your business is consistently profitable and you want to save on self-employment taxes. Works well for service professionals or businesses with steady income.
C-Corp
Definition: A corporation under Subchapter “C” of the IRS code, owned by shareholders. The corporation pays taxes on profits, and then shareholders pay taxes again on dividends (that’s the “double taxation” you might hear about).
Pros: Unlimited growth potential. C-Corps can issue stock, attract unlimited investors, raise venture capital, and even go public. They also offer the strongest liability protection. This is “big time” status.
Cons: More expensive and complex to set up and maintain. Subject to both corporate taxes and shareholder taxes.
Business Presence
Once you’ve formed your business (most likely an LLC or PLLC), the next step is to establish its presence. The first thing you’ll need is an employer identification number, or EIN, which is essentially your business’s Social Security number. With an EIN, you can open a business bank account, a non-negotiable step if you want to keep business and personal finances separate.
After that, it’s about building credibility. Lenders and vendors want to see that you’re running a legitimate operation, not just a hobby. Here are some of the first things we did at the laundromat in week one:
- Got a business phone number
- Set up a business website
- Established a business email address (using our domain, not Gmail or Yahoo)
- Secured a physical address
- Set up utilities in the business name
We actually have two addresses: the laundromat’s physical location and our registered agent’s address, which serves as the official point of contact for the business. Both matter because when someone looks you up, whether a vendor, bank, or even a customer, you want to look professional and credible from day one.
Establishing Business Credit Profiles
Start a business. ✔️ Establish business presence. ✔️Now it is time to establish business credit profiles.
1. Get a D-U-N-S number.
A D-U-N-S (Data Universal Numbering System) number is a unique 9-digit identifier created by Dun & Bradstreet (D&B). This number is important because many banks and vendors use it to tie your payment history to your business credit profile.
The good news is that it’s free to apply, and you can request it directly on D&B’s website. If you’re starting from scratch, expect it to take up to 30 days to complete. When I bought my laundromat, the LLC I purchased already had a D-U-N-S number assigned, but if you’re forming a new business, this should be one of your first steps.
2. Know the Business Credit Bureaus.
Dun & Bradstreet (D&B) is the most widely recognized bureau for vendor relationships in the business world. They’ve been around since the 1800s and are the ones who issue your D-U-N-S number. D&B also uses the PAYDEX score, which ranges from 0 to 100 and reflects your payment history with suppliers and vendors. A score of 80 means you consistently pay on time; 90+ means you pay early. Unlike personal credit, you must initiate your profile with D&B, so it’s essential to take ownership of this step. This was new to me when I entered the business credit space. I was familiar with Experian and Equifax from my background in personal finance, but D&B was a new player I had to learn about.
Experian Business should feel more familiar. In addition to its personal credit division, Experian also has a business division. Their primary scoring model is the Intelliscore Plus, which ranges from 1 to 100 and predicts the likelihood of your business becoming delinquent within the next 12 months. They base this score on a business’s payment history with landlords, suppliers, and lenders, the amount of debt it carries, its time in business, and public records.
Equifax focuses on payment patterns, credit risk, and public filings, such as liens and bankruptcies. They provide a Credit Risk Score, ranging from 101 to 992, that estimates the likelihood of your business defaulting, and a Payment Index that measures your consistent payment to vendors compared to industry averages.
Essentially, D&B is all about trade vendors and supplier relationships, Experian Business focuses on overall financial health, and Equifax Business zeroes in on payment trends and public records. Ultimately, you need to build and monitor credit with all three, because you never know which one a lender or vendor might pull.
3. Understand How Business Credit Works
Business credit doesn’t build itself automatically, and it doesn’t work exactly like personal credit. Instead, it’s a system of vendors, bureaus, and scores that all tie together. Once you know how the pieces connect, it starts to make sense.
The foundation of business credit is built through vendor accounts. When you hear terms like Net-30 or Net-60, that means you have 30 or 60 days to pay your invoice. If a vendor reports those payments and you pay on time (or early), those accounts become part of your history.
Every reported account shows up as a trade line on your profile. A trade line is simply the record of a credit relationship. For example, ordering supplies from Uline on Net-30 terms. Once Uline reports your payments to Dun & Bradstreet, that becomes a trade line that strengthens your PAYDEX score. The more positive trade lines you have, the stronger your profile looks.
The credit bureaus then compile these trade lines, along with other information like outstanding debt and public records, into a business credit score. Each bureau uses its own scoring model, but the idea is the same: the score reflects how risky (or safe) your business looks to lenders and vendors. Higher scores mean lower risk. D&B’s PAYDEX runs from 0–100, Experian’s Intelliscore Plus also runs from 1–100, and Equifax’s Credit Risk Score ranges from 101–992.
One key difference from personal credit is that business credit heavily rewards early payments. With personal credit, paying by the due date is enough. With business credit, especially with D&B, you’ll want to pay before the due date if you want to achieve a top score. For example, a PAYDEX score of 80 indicates that you pay on time, but to enter the 90s, you’ll need to consistently pay early.
Another difference is the role of the personal guarantee (PG). Early on, many banks and lenders won’t just rely on your business credit. You will find that they’ll require you to personally guarantee the debt. I had to do this with my commercial lease for the laundromat. That means I am personally liable if the business doesn’t pay. This is normal in the beginning, but as you build strong business credit with multiple trade lines, consistent payments, and higher scores, you can eventually qualify for financing in the business’s name alone.
In short, the flow looks like this: vendors extend you terms → you pay early → those payments become trade lines → the bureaus calculate your scores → lenders and vendors use those scores to decide whether to extend you more credit, better terms, or financing without a personal guarantee.
Business credit factors
Business credit doesn’t operate exactly like personal credit, and this is where many new entrepreneurs get tripped up. A few key differences that matter:
- Vendor Accounts
Personal credit is primarily built on credit cards, loans, and mortgages, but business credit is heavily influenced by trade lines (payment history with suppliers, wholesalers, and service providers). At the laundromat, for example, I currently have our building supplies and our cleaners on Net-30 terms, and I’m always looking for more vendors who report to the bureaus. Each of these accounts helps build credibility and establish my PAYDEX score.
- No generalized FICO score
In personal finance, everything usually comes back to your FICO score. Business credit doesn’t have a single universal score like that. Each bureau, such as D&B, Experian, and Equifax, has its own scoring system, and your business may appear differently depending on which report a lender checks. There is, however, a score called the FICO SBSS (Small Business Scoring Service). It ranges from 0 to 300 and combines data from both your personal and business credit. The SBA commonly uses this score for certain types of loans and may be requested by banks or credit unions.
- On time isn’t enough.
When you focus on your personal credit, paying bills on time helps maintain a solid score. In business credit, scores like PAYDEX actually reward you for paying it early. So, if your net-30 payment is not due yet, pay it on day 25 instead of 30, and this can help boost your score.
- Public records matter
Liens, judgments, and bankruptcies significantly impact business credit scores. These red flags appear quickly, and lenders pay attention to them. Sometimes, even something as routine as a construction lien during a remodel can show up on your record. If that happens, ensure it’s released as soon as you pay the invoice in full; otherwise, it can unnecessarily drag your score down.
- Length of history
Similarly to personal credit, the longer your business has been around and consistently pays bills, the stronger your profile will become. A company that is two to five years old with a clean history looks less risky than my measly 4-month-old business.
Build Business Credit
Once you have established your business structure and profile, you can begin building a credit history. This is similar to personal credit; you have to prove that you will borrow money and pay it back responsibly, but the building blocks do look a little different.
- Vendor Trade Lines
The accounts we have been discussing with vendors get reported to the business credit bureaus as a tradeline. Not every vendor reports, so you will need to find vendors that will. Some common examples include Uline, Office Depot, Amazon, Grainger, and Quill; however, this will vary depending on the industry your business is in and what you can benefit from the most. Each payment will help increase your PAYDEX score.
- Net 30 Accounts
These are vendor trade lines with defined payment terms. These are one of the best ways to establish a payment history. Remember, PAY EARLY, not just on time, to increase your score even more.
- Business Credit Cards
Find business credit cards that report to business bureaus (not all do). Initially, you may need to provide a personal guarantee, but this will still help you establish revolving credit. Similar to individual cards, some credit cards offer perks such as cash back or travel points. Some quick examples are: Chase Ink Business Preferred, American Express Blue Business Cash, or Capital One Spark Business.
- Fuel Cards
If your business involves driving, a fuel card can be a huge win. They often report to business bureaus and offer discounts or cash back. For example, my parents own an oilfield service company that contracts with major oil companies to maintain and service wells they’re drilling. They also operate a few of their own wells and buy and sell oilfield equipment to larger companies.
Basically, their crews are on the road all day long—each route can run 300–500 miles, and on busy days they might have two to five trucks out at once. With that much driving, fuel is one of their biggest unavoidable expenses. By running all of it through a fuel card, they not only build business credit but also earn $3,000–$4,000 a year in cash back on gas they’d be buying anyway. It turns a major cost into both a credit-building tool and an extra source of savings.
- Equipment Financing/Leasing
This is very familiar to me in the laundromat space. Many people finance new equipment from the distributor instead of buying it outright, but there are also options for leasing equipment. This would help you conserve cash and get a positive payment history reported to the bureaus.
- Store Accounts
Major retailers, such as Lowe’s, Amazon, or Office Depot, often offer business accounts that report to the credit bureaus. They can be easier to get approved for than traditional loans and sometimes come with rewards. If you shop at one place often, opening a store account can be an easy way to add another reporting trade line.
- Small Business Loans or Lines of Credit
This may be challenging for you to access initially, but once you have established a history, you will be able to secure a small business line of credit with a bank or credit union. If you need a loan sooner, you can consider small business loans; however, many will have strict requirements, including established credit and a certain amount of time in business.
- Utility Accounts
Some utilities, such as phone, internet, or power, report to the business credit bureaus. If this is a recurring expense, ask your providers to report your payments – you might as well try to use them to build credit.
Every on-time payment adds credibility. Over time, your business credit profile becomes an asset that opens doors to bigger opportunities, lower loan rates, financing without personal guarantees, and larger vendor accounts.
Tips
Building business credit isn’t about tricks or hacks; it’s just consistency and discipline, just like personal credit.
- Keep balances low
High balances compared to your credit limits will hurt your score, just like your personal credit. Use less than 30% of your available credit and pay it down regularly. This will show lenders that you aren’t stretched too thin.
- Monitor reports
Mistakes happen. Vendors may not report information correctly, or accounts may not be added when needed. Be sure to check your business credit report with D&B, Experian, and Equifax at least quarterly.
- Build a history
Time matters, and the longer you have trade lines open and in good standing, the stronger your business profile will be.
- Increase trade accounts
Grow your trade lines gradually. Start with small accounts that are easy to open, for supplies you are already buying. Even small orders will help. Then you can add bigger suppliers when your business expands. A diverse range of trade lines will demonstrate to lenders that you can handle a variety of credit.
- Buy things you actually need
You don’t have to spend a bunch of money to build credit. Small, regular purchases, such as office supplies and cleaning products, will make a difference. Buy what your business already uses and let those payments work for you in your favor.
- Don’t mix business and personal finances.
Keep them separate. Don’t swipe your personal card for business purchases, and don’t run personal expenses through your business accounts.
- Don’t assume all vendors report
Not every vendor or supplier reports to the credit bureaus, so check before opening an account and ensure they report to at least one of the business credit bureaus.
- Don’t treat business credit as free money.
Remember, credit is a tool. Use it to leverage growth and opportunities, not to cover overspending or bad cash flow habits.
Leverage Credit for Growth
This is the fun part. The real advantage of business credit comes when you can use it as a growth tool. When used wisely, it enables you to scale your business, protect your personal finances, and take on larger opportunities.
- You can separate your personal finances from the business.
One of the biggest benefits of strong business credit is that you don’t have to put your personal assets on the line anymore. Instead of personally guaranteeing your commercial lease (like I did) or your business credit cards, you can secure financing in your business’s name. This protects your personal finances, allows you to take advantage of opportunities, and keeps the risk where it belongs– in the business.
- Don’t use credit as a crutch.
Too many people treat credit as a lifeline when they can’t afford something. There’s a huge difference between borrowing out of desperation and borrowing strategically. Using credit to launch a new revenue stream, improve efficiency, or upgrade equipment is smart. Using it to cover poor cash flow habits is dangerous. Credit should multiply your opportunities, not patch over bad habits.
- Use credit to grow your business.
Smart ways to put credit to work might include upgrading your space, purchasing income-generating assets, or financing equipment that enhances efficiency or enables you to serve more customers. The goal is always the same: use borrowed dollars to make more dollars.
- Learn how to use OPM
While being debt-free has its appeal, it is also a slow growth plan. Many successful businesses will learn how to use other people’s money wisely, borrowing at low interest rates and utilizing it to capitalize on opportunities with high returns. Don’t just borrow money because you can or borrow it out of desperation; be disciplined and borrow money that can help you grow and scale your business.
Conclusion
Over the last three parts, we’ve walked through the basics: what credit is, how to repair or build it personally, and now, how to establish and use business credit for real growth. I’m on this journey right alongside you. I’ve built my personal credit, and we’re building our business credit; now we’re learning how to leverage it strategically in our businesses.
I’ll continue to share the strategies we’re actually using as we expand and grow in the long term. For now, I’ll leave you with this: don’t get stuck in analysis paralysis. Once you have a business, apply for an EIN, open a business checking account, and request your D-U-N-S number. Take that leap one step at a time, and you’ll be on your way to building a business credit profile that works for you instead of against you.