How Long Does it Take to Build Business Credit?
While building a robust business credit report can take as long as three years, most new companies can achieve a top-tier business credit score in 12 months.
If you’re interested in learning more about building business credit fast, read on.
How Fast Can I Build Business Credit?
Establishing business credit depends on numerous factors and no set amount of time applies to every business across the board.
That said, if you do everything right, follow best practices, and stick to responsible business financial management, you should become relatively creditworthy in a year.
Note that your business credit profile will still likely be thin for many lenders, and most will want to see a longer payment history or larger credit limits before deeming you eligible for large business loans.
But you should be able to reach a point where your business credit profile allows you to qualify for adequate financing to gain momentum.
As we just mentioned, it often takes as long as three years to build serious business credit where you’re eligible for high credit limit loans and can get perks like low interest, minimal fees, and no personal guarantee.
But one year is a reasonable time frame to achieve a high enough business credit score to be eligible for certain small business loans and business credit lines.
Therefore, if you’re a new small business owner just getting established, you’ll need to have patience and set realistic expectations about building your credit history.
You’ll also need to follow the fundamentals of business credit building, which we’ll discuss later.
Other Business Financing Factors
One of the biggest factors lenders look at is how long you’ve been in business.
A typical lender will want you to have been around for at least two years before offering a small business loan.
Another factor is company revenue.
“The bare minimum annual revenue for funding from a traditional lender, like a bank, is $100,000, though most lenders set higher requirements,” Bankrate explains.
That said, Bankrate notes that alternative lender options are also available that may offer financing to businesses with annual revenue as low as $33,000.
Next, there are company assets, such as real estate, property, equipment, inventory, and outstanding invoices. These can all serve as collateral to secure a business loan and give a lender security in case of default.
Finally, there’s your industry code, which identifies what type of business you operate and the sector you’re in.
The North American Industry Classification System (NAICS), for instance, uses 5 or 6-digit codes that let lenders quickly assess risk levels.
Businesses in online retail or consulting would be examples of low-risk industries because they’re not as prone to economic volatility or intense regulations. Those in firearms or online gambling would be examples of high-risk industries because of ever-changing regulations.
Set Business Credit Goals
A critical precursor for reaching a strong business credit score is having clear goals of what you want to achieve.
This often starts by figuring out what type of financing you want.
A business credit card, for example, is usually easier to get than a bank credit line. So if you’re a new business owner, you may want to focus primarily on generating cash flow through a credit card during the initial stages of building business credit.
Then, as your business matures over time and you reach a higher business credit score, you could move on to trying to secure a bank business line or an SBA loan.
As long as you’ve practiced responsible financial management and have good credit, you’ll also likely qualify for a credit card with better terms.
Besides that, you’ll want to thoroughly research the guidelines for each type of loan so you know what the eligibility requirements are, the terms and conditions, the application process, and so on.
Also, create a realistic timeline for reaching your business credit goals.
Be sure to consider how long it takes to build enough credit to become eligible, know what specific actions are required to obtain funding, and what variables may affect your timeline.
This should put you on a positive trajectory for establishing a good business credit score.
How to Speed Up Business Credit Building
There are four main ways to achieve a good business credit score quickly while also avoiding bad credit pitfalls.
Apply for Lots of Business Credit Vendors
One of the quickest ways to build business credit is to get financing from vendors that report to major business credit bureaus like Dun & Bradstreet, Experian, and Equifax or a members-only credit bureau like the Small Business Financial Exchange.
Like succeeding in many areas of business, it’s a bit of a numbers game.
The more business credit vendors you apply to, the more likely you are to get funding to cover each major business expense, and the quicker you can build business credit.
Note that you’ll ideally want to focus on vendors with shorter terms like net-30, as they tend to report to credit bureaus quicker than those with longer net terms like net-60 or 90.
Make Payments Early
Just like payment history plays a huge role in determining your personal credit, the same is true with your business credit score.
After all, one of the main things business credit bureaus look at when assigning a business credit score is payment history.
At the bare minimum, you’ll always want to make a timely payment to each lender for a credit card, business loan, or any other type of business line.
However, going one step further and making payments early is even better.
In fact, Dun & Bradstreet only gives perfect scores to companies that pay early.
Leverage Your Personal Credit
Although your personal credit score is different from your business credit score and can’t be used to determine eligibility for all types of business funding, many lenders will look at it.
“This is especially true for sole proprietors or new businesses that haven’t established business credit,” writes Bankrate.
If, for instance, you have a solid personal credit score, you may be able to leverage it to qualify for business credit cards that report to business credit bureaus.
To quantify, a personal credit score of 680 or higher should usually be sufficient. And if you have a score of 740 or higher, you can likely get favorable terms on a credit card or business credit line.
If you have bad personal credit, you’ll want to work on improving it because, in addition to enhancing your personal credit history, it can also help open doors for your business and put you on your way to achieving good business credit.
Use eCredable’s Past Payment Reporting Feature
Finally, you can use a tool like eCredable Business Lift to report business utility and telecom payments to accelerate your business credit building.
Once you sign up, we’ll automatically attempt to download up to 24 months of your payment history to service providers and will report it to Equifax and Creditsafe. The Business Lift subscription payment is reported to these bureaus, plus Dun and Bradstreet and Experian.
In turn, this can quickly boost your business credit scores as long as you’ve made your payments on time or early.
Other Business Credit Tips
Beyond that, you can raise your business credit score by doing the following:
Make sure you’ve established your business as a separate legal entity and choose a legal structure (LLC, partnership, corporation, etc.)
Get your EIN and DUNS Number to uniquely identify your business
Open a business bank account (not only does a business bank account make you look more professional, but it’s also required by many lenders)
Apply for a business credit card (a business credit card helps build business credit and makes it easier during tax time)
Apply for trade credit from a vendor that reports to at least one major business credit bureau
Also, be sure to monitor your business credit report to ensure the information is accurate. If you happen to find an error, you’ll want to dispute it right away, as failing to do so could potentially hurt your business credit score.
This can be done by simply checking your business credit report via a credit bureau like Dun & Bradstreet or Equifax.
Does Business Credit Start at 0?
The range of business credit scores can vary depending on the particular credit bureau.
But, yes, many business credit scores like the Dun & Bradstreet PAYDEX Score and Equifax’s Payment Index Score start at 0 and go up to 100.
If your business is just starting out and you haven’t yet established credit, you’ll likely have a low credit score or no credit score at all.
However, once you initiate some basic credit building, your credit history should gradually improve.
Can You Get Business Credit Right Away?
While it takes about 12 months to build solid business credit and as many as three years to build a comprehensive credit profile, you can start building at least some business credit within the first six months.
This is done by taking care of the fundamentals like registering your business, getting an EIN and DUNS Number, opening a business bank account, and applying for a business credit card.
How Long Does it Take to Report Business Credit?
It typically takes at least 30 days to report business credit to a credit bureau.
However, that’s the minimum, and in many cases, a credit card or business line will take closer to 60 or 90 days.
At that point, your payment history should appear on your business credit report, and you can officially start to build credit.
What is a Good Business Credit Score?
First, be aware that a personal finance credit score range is a lot different from a business credit score range.
Personal credit scores typically range from 300 to 850, while business credit scores usually range from 0 to 100.
In general, a score of 80 on Dun & Bradstreet’s PAYDEX Score, Equifax’s Payment Index, and Experian’s Business Credit Score — all of which range from 0 to 100 — is considered good.
This indicates a low credit risk, which means you stand a reasonable chance of being approved for a loan or credit account by many business lenders to fund your business.
Learn More About Building Business Credit:
- Low Risk Industries for Business Credit
- How To Build Business Credit Without Using Personal Credit
- Can You Buy a House with Business Credit?
- How to Build Business Credit With Bad Personal Credit