What is the fastest way to get credit for an LLC?

As an entrepreneur, creation of a limited liability company (SARL) opens your business to better financing and insurance options. This move can also help you create great working relationships with other businesses for rapid growth.

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

That said, building credit isn't easy and can take time. So, what’s the quickest way to get credit for an LLC? Here are the steps to follow:

Step 1: Have a professional installation

Credit reporting agencies must have a solid business foundation to be able to assign a favorable credit rating. This requires a professional setup including a business address, management team, and business email addresses. Most importantly, an LLC needs a website to ensure visibility.

Step 2: Legally Create the Business

For a business to operate as an LLC, it must be recognized as such. 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 the business uses to apply for financing and permits, file tax returns, and open bank accounts.

Step 3: Get a DUNS Number

Request a Dun & Bradstreet Universal Data Numbering System The number is another important factor when looking to obtain credit quickly. This is a unique identifier that allows other companies to access a company's credit.

It should be noted that a DUNS number is not a government requirement. However, the identifier makes it easy for suppliers, potential partners and lenders to discover positive and negative credit information.

Step 4: Get a business bank account

An LLC must be kept separate from the owner's bank accounts and expenses. With a business bank account, the LLC can operate as an independent entity when establishing credit.

For example, when applying for a business credit card, the bank account becomes the primary transactional reference point. Additionally, the account serves as a banking reference for data that lenders must review when reviewing loan terms and credit limits.

Step 5: Work with Companies that Report to Credit Bureaus

LLC credit scores are compiled by credit reporting agencies based on reported payments. So, to ensure your business credit benefits from all transactions, only work with lenders, suppliers, vendors and other businesses that report to credit bureaus.

Step 6: Establish relationships between accounts payable

A major factor in establishing credit is demonstrating that you can manage your debt repayments. To this end, work with companies that provide 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 extremely beneficial, especially for a startup. There is one caveat: sellers must report to the credit bureaus. Alternatively, you can include them in your LLC's business references to enable data collection by interested parties.

Step 7: Pay debts on time

Whether you're looking to build your personal or business credit, unpaid and late payments are bound to have a negative impact on your creditworthiness. To avoid this impact, make sure your payment history is clean.

Pay your debts on time or even before the due date if possible. In particular, advance payments can improve the PAYDEX Scorea business credit score that relates to how you pay other businesses.

Step 8: Monitor Your Business Credit Reports

The main bureaus for reporting business credit scores are Dun & Bradstreet, Equifax and Experian. For a comprehensive understanding of your rating and the factors that could weaken it, you should monitor reports from all three bureaus.

Look for outdated information, errors, and inconsistencies in reports. Ensure correct changes are made by the bureaus and go further by querying major issues with the reporting provider or lender.

The essential

Building exceptional business credit for your LLC is not an easy endeavor. The process requires planning, sometimes before registering a business. Additionally, you may need to work with credit builders to help you follow the steps above. Additionally, your personal credit needs to be excellent to ensure that your finances don't take a hit if your business finances falter.