Are you using credit to help finance your new business venture?

You’re not alone as statistics show that over 65% off all business owners use credit for business purchases.  But what’s alarming, is that only 50% of those cards are actually in the business’ name.

As a business owner using personal credit cards for business is a risky approach since you assume total liability and if your company is sued or fails you risk losing personal assets and good credit ratings as well.

So how do you go about building credit in the company’s name without putting your personal credit on the line?

For starters, if you operate as a sole proprietorship you’ll need to incorporate your business and obtain a Federal Tax Identification number.

As a corporation your company is treated as a separate being with its own tax registration with the IRS and state agencies. It files its own tax returns and it can also create its own credit files completely separate from that of its owners.

Your company’s Tax ID Number or Employer Identification Number is the number that you will use to get registered with the business credit bureaus like Dun and Bradstreet.

You will also be required to furnish this number on corporate credit applications because lenders use this information to conduct a business credit check on your company.

Before you start to apply for credit make sure your corporate records, state filings and required business licenses are all up to date. In addition, get your company’s phone number listed in the 411 directory so a supplier or lender can complete every aspect of its verification during the underwriting process.

After you meet these requirements you will be ready to apply for credit and the best place to start is with suppliers. Many types of suppliers, including major brands, extend lines of credit to businesses like yours giving you the opportunity to finance purchases and conserve your company’s cash.

You can obtain products like office supplies, computers and marketing materials with payment terms ranging from net 30 to net 60 days.

You should focus on applying for credit with suppliers that provide products and/or services your company needs in order to make regular purchases using your credit line. By paying invoices on time you will build business credit history and increase your company’s creditworthiness.

With a strong business credit report you can stop relying on your personal credit to qualify for the financing your company needs. Since a creditor, lender or supplier can now easily determine your company’s risk level with a business credit check qualifying will be a much easier process.

As a startup I know it can be tempting for you to decide on operating your business as a sole proprietorship and using your personal credit to fund your business simply because it’s one of the easiest structures to create and you already have the cards on hand.

But by building business credit for your start up, you can improve your company’s image, protect your personal credit, limit your liability and increase your credit capacity since businesses can obtain 10 to 100 times greater financing then an individual.

About the Author

Marco Carbajo's Profile Picture

Marco Carbajo is CEO of the Business Credit Insiders Circle (, a step-by-step business credit building system providing lines of credit, trade credit and funding sources.


debtperformance | Window Shopper | 10/11/2012 – 8:07 pm

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DoveBuilders | Window Shopper | 6/19/2012 – 12:59 am

Another reason that I’ll be incorporating. I don’t want to use my credit to 
finance my business, and I especially don’t want to put my family’s house on 
the line. Business credit is a must.
Professional Web Site: Commercial Construction

Melda | Window Shopper | 2/10/2012 – 1:02 am

Financial aspect certainly serve as the lifeblood of any business, they even possess great purchasing power as a business owner it is important that your company has good credit. Interesting tips! appropriate for aspiring business owner, so sure this post will help them a lot to gain useful insights that can be applied later on as they established their respective business ideas. Philippine real estate
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gianez | Window Shopper | 12/6/2011 – 2:29 pm

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Marco Carbajo | Guest Blogger | 6/11/2011 – 1:48 pm

Hi Anthony, Good feedback on tracking personal guarantees but a business owner can avoid a PG altogether if they focus on applying for credit with starter vendors. Vendors like Quill, Uline or even name brand companies like FedEx Office will extend a commercial account to companies without a personal guarantee. The terms will be net 30 days but its still a great way for a new company to start establishing credit while conserving cash flow. In addition, many suppliers will offer startups or businesses with little to no business credit a line of credit without a personal guarantee but initially may require 25% down on the initial purchase. They also may require just an initial purchase to activate the credit line but still no PG is required.   All the best,   Marco Carbajo Business Credit Insiders Circle
Professional Web Site: Business Credit Blogger

Antony G | Window Shopper | 6/9/2011 – 8:22 am

When applying for credit with suppliers, getting started is the hardest part. Since you won’t have any business credit established, a good supplier will still try and set up an account for you by asking for a personal guaranty and by running your personal credit report. This may be the only option you have to get credit extended but don’t let the process stop there. Keep track of all the personal guaranties you sign. If you ever close or sell the business, send a letter to your supplier cancelling your personal guaranty; send the letter certified mail and keep the return receipt (green card) forever. When signing a personal guaranty, ask the supplier if you can make the guaranty only good for one year. That puts the follow up responsibility on them. After one year, contact your supplier about cancelling your personal guaranty. This works especially well if you have established other lines of credit that are not personally guarantied. Your supplier won’t want to lose your business if you have been a good customer and you stand a good chance of them releasing the personal guaranty.
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B.talbot | Window Shopper | 6/3/2011 – 5:15 am

Interesting post. I'll have to keep it in mind, because I'd love to run my own business soon. It'll obviously be challenging, so I can use all the financial help I can get.. BUSINESS CASH ADVANCE

Marco Carbajo | Guest Blogger | 6/2/2011 – 10:30 am

Hi Zoumana, There are many creative ways to obtain financing even if you have less than perfect credit. You can always convert paper assets you may currently hold into cash but the key is to borrow from your greatest strength. While your personal credit may be a weakness at this time you may have other strengths such as strong collateral or a qualified cosigner. There are also options like crowd funding or peer to peer lending that offer a viable alternative to traditional lending. To be most effective with these options make sure you have a solid business plan so you can effectively present your idea to potential backers. All the best, Marco | Performer | 6/2/2011 – 9:11 am

Hi Mr Carbajo, My name is zoumana.I owne a construction company registered as minority In 2007 i took a microloan from SBA $25,000 until now i didnt pay back the loan cause for many reason.lost house,bad credit. Now i have a good idea for my company that can bring me a lot of cash flow for my business.My need will be $19, is possible for me to have a business loan? thank you

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