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What’s the Fastest Way to Get Credit for an LLC?

Business Credit Building

Business Credit BuildingAs an entrepreneur, establishing a limited liability company (LLC) opens your business to better financing and insurance options. The move can also help you create great work relationships with other businesses for fast growth.

The success of an LLC, however, depends on the business’ credit. A strong credit history is an indicator of financial acumen and stability, which signals to lenders and investors that the LLC has a lower risk level.

That said, building credit is not easy and can take time. So, what is the fastest way to get credit for an LLC? Here are the steps to follow:

Step 1: Have a Professional Set Up

Credit bureaus need to see a strong business foundation for them to award a favorable credit rating. This calls for a professional setup that includes a business address, management team, and business email addresses. Most importantly, an LLC needs a website to ensure visibility.

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Step 2: Establish the Company Legally

For a business to operate as an LLC, it needs to be recognized as such. The required documentation includes federal and state business licenses and articles of organization.

To ensure federal tax compliance, an LLC must also obtain an employer identification number (EIN). This is the identity that the company uses when applying for funding and permits, filing tax returns, and opening banking accounts.

Step 3: Get a D-U-N-S Number

Applying for a Dun & Bradstreet Data Universal Numbering System number is another important factor when looking to get credit fast. This is a unique identifier that allows other businesses access to a company’s credit.

It is worth noting that a DUNS number is not a government requirement. However, the identifier makes it easy for suppliers, potential partners, and lenders to easily uncover both positive and negative credit information.

Step 4: Get a Business Bank Account

An LLC needs to be separated from the owner’s bank accounts and expenses. With a company bank account, the LLC can operate as an independent entity when building credit.

For example, when applying for a business credit card, the bank account becomes the primary point of transactional references. Additionally, the account serves as the bank reference for data that lenders need to review when considering loan terms and credit limits.

Step 5: Work With Businesses that Report to Credit Bureaus

LLC credit scores are set by credit bureaus which rely on reported payments. So, to ensure that your business credit benefits from all transactions, only work with lenders, suppliers, vendors, and other businesses that report to the credit bureaus.

Step 6: Establish Accounts-payable Relationships

A major factor in building credit is demonstrating that you can handle debt repayment. To this end, work with businesses that extend trade credit. In this model, you receive inventory, sell, and pay at a later date.

Known as accounts-payable, this type of relationship can be overly beneficial, especially for a startup. There is one caveat: the vendors have to report to the credit bureaus. If not, then you can include them in your LLC’s trade references to allow data collection by interested parties.

Step 7: Settle Debts on Time

Whether you are looking to build personal or business credit, unpaid and late payments are bound to have a negative impact on your creditworthiness. To avoid the impact, ensure that your payment history is clean.

Pay debts on time or even before the due date where possible. Early payments can especially improve the PAYDEX Score, a business credit rating that is concerned with how well you pay other businesses.

Step 8: Monitor Your Company Credit Reports

The major reporting bureaus for business credit scores are Dun & Bradstreet, Equifax, and Experian. For a holistic understanding of your rating and the factors that may be weakening it, you need to monitor reports from the three bureaus.

Look for outdated information, errors, and any inconsistencies across the reports. Ensure that the correct changes are made by the bureaus and go a step further by querying major issues with the reporting vendor or lender.

The Bottom Line

Building a stellar business credit for your LLC is not an easy undertaking. The process requires planning, sometimes before registering a company. Additionally, you may need to work with credit builders to help you navigate the above steps. What’s more, your credit needs to be excellent to ensure that your finances don’t take a hit if those of your company waver.

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