Best ways to establish credit history with a new LLC

6 Replies

I just created my LLC a few weeks ago and was looking to establish credit history for my company. A couple of questions:

1) Is there a better/easier way to establish credit history outside of applying for a business credit card?

2) Will I be required to leverage my personal credit history to help establish my company credit hisotry (i.e. by co-signing)?  

Looking forward to the feedback!  Thanks

Business credit is not similar to personal credit

Until you are very well established track record, most commercial loans will require you to provide a personal guarantee. Business loan conditions vary wildly depending on the product so specifics of the deal matter, it's hard to say what a standard guarantee will entail. 

Best way to build business credit is to use your LLC to do increasingly larger deals over a long amount of time.

Thanks @Alexander Felice for the feedback.  However, can you elaborate on what you mean by "personal guarantee"?  Are you saying I will have to personally co-sign any business loans by leveraging my personal credit until my business credit has established itself?

Originally posted by @Eric Adu :

Thanks @Alexander Felice for the feedback.  However, can you elaborate on what you mean by "personal guarantee"?  Are you saying I will have to personally co-sign any business loans by leveraging my personal credit until my business credit has established itself?

100% yes

and business credit is far more complicated to establish because it doesn't report the same way. Business credit isn't like personal credit where if you pay they just say you're a good borrower, because with personal credit they have a personal guarantee built in. They know any hits to your credit stay with you, you have skin in the game. 

With a business, if you don't personally guarantee and the business fails you just walk away and you could start a new business tomorrow. The bank wants someone on the hook hard for these loans, a few credit card payments are not going to deter that need. 

I work in commercial lending, most loans we do are personally guaranteed until they get really big and self sufficient. 

Thanks. One last question: So doesn't that defeat the whole purpose of establishing an LLC? That is, to keep my personal finances totally separate from my business finances? If my business loan information will show up on my personal credit report, then my personal and business finances truly aren't separate. Please help me understand how this works. Thanks.

I realize this post is from almost 2 years ago, but it might help someone going forward.  I am working with a company through the mentorship group in which I am a part (they use the company, and I started using them too).  I was advised to apply for a DUNS number through Dun & Bradstreet.  After getting that number, I signed up with various vendors who report to D&B, like Amazon business for a line of credit that is payable in full with each statement (checks your personal credit, and you personally guarantee the account); Grainger (doesn't check your personal credit); Exxon Mobil gas card (checks your personal credit, and you personally guarantee the card); companies like Quill (do not check credit but report to D&B every month on your company's payment history).  Those are just a few examples - I am sure there is a list online of businesses that report to D&B.  I am not recommending any of these vendors, just listing a few for examples :) As you start to use these accounts, I was told to purchase $50/month on 4 separate accounts.  Over the course of 6-12 months, your company develops its own credit score, called a Paydex score.  This is the credit score for a business, equivalent to the credit score for an individual.  The idea is that eventually, your business will be able to stand on its own credit, and you will no longer have to personally guarantee or use your own personal credit to further your business.  I was told that the quicker you pay your accounts each month, the higher your Paydex score will be.  Bonus points for paying early, even.  It's not a quick fix, but it was nice to discover that I could empower my business with its own business credit!  Hope this helps!

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