Building business credit is nothing more than having great credit scores for your business that are not, in anyway, connected to you personally. Having a good business credit history has a very positive effect on your business’s ability to borrow and upon your ability to negotiate favorable loan terms.
Building business credit is about establishing on time, or early, payment histories and having those payment histories reported to the three business credit reporting agencies. Therefore, building your business credit takes time, careful planning, and being educated on what steps to take. This should begin well in advance of your business actually needing or applying for capital.
Most Lenders (except the very high interest ones) are not inclined to lend money to a business with little or no business credit history. They are even less inclined to lend if your business is in negative cash flow situation or if you really need the loan just to keep going.
Therefore, the time for building business credit is before you need to use it. Just like you would want to have good personal credit scores before you apply for a home or car loan. The same is very true for your business.
Building business credit will require that your business first borrows or buy products and services from vendors or suppliers that extend to you payment terms and, more importantly, will report your business payment history to the three business credit reporting agencies which are Dun & Bradstreet, Equifax, and Experian.
Your business must also have three business credit cards that are in no way connected to, or associated with, you personally. You cannot build your business credit without your business payment histories getting reported to the business credit bureaus.