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Establishing a strong credit history is an important part of building a business. Not only can a solid credit history improve your company’s cash flow through better loan terms, it will help you get financing when you need it most. According to the Small Business Administration, insufficient or delayed financing is the second most common reason businesses fail.

Additionally, your business creditworthiness helps a variety of companies determine whether to do business with you and on what terms. A sound credit record will help you qualify for lower insurance premiums, more competitive credit card interest rates, and better access to supplies and inventory. Here are some steps you can take to establish and maintain good business credit:

Separate business and personal credit. While you may have relied on personal credit to finance your business, you will need to incorporate your business to establish a separate credit history for your company. Legally separating business credit from personal credit can also help protect your personal credit if your business credit suffers. After incorporating your business, apply for a tax identification number from the IRS. You’ll use this number to register your business with credit bureaus, open business bank accounts, and build your business credit profile.

Monitor your credit profile. If you don’t already have a business credit file, establish one by applying for a DUNS number from Dun and Bradstreet, one of the main business credit reporting agencies. Then, regularly check up on your business credit file to make sure there is no fraudulent or inaccurate information. You can search to see if your company is currently listed with D & B, apply for a DUNS number, and update your businesses information at www.dnb.com.

Open a business bank account. Apply for a checking account as well as a business credit card. As you provide information for these accounts, be consistent in using the same business name, address and phone number. This will make it easy for the credit reporting agencies to keep your records in one file.

Establish lines of credit. Build and maintain credit relationships with suppliers that report transactions to business credit reporting agencies. Make small charges and pay them off early. Unlike personal credit scores, your business credit score gets a boost when you pay bills before they come due. 

Pay all bills on time. As with consumer credit, tardy bill paying will ding your business credit score. Never make a late payment, and if you can, pay some bills before the due date. The promptness with which you pay your bills is the most significant contributing factor to your credit rating, according to Dun and Bradstreet.

Ready your documentation. Organize key documentation, including tax records and earnings statements, so you have it on hand for lenders to review. Also be prepared to explain your documentation to lenders to present the strongest case as to why they can feel confident lending money to your business.

Let Zions Bank’s Business Resource Center assist you with your business needs. Call us for a free appointment at (801) 594-8245. We are open Monday through Friday from 9 a.m. to 5 p.m. Beth Holbrook can be reached at beth.holbrook@zionsbank.com.