19 Steps to Building Business Credit Without a Personal Guarantee

While obtaining a business credit card, small business loan, and a business line of credit is a common objective for many small business owners, there is a growing demand for learning how to qualify without having to use personal credit or a personal guarantee.

I’m happy to see that more and more business owners are embracing the idea of completely separating their personal credit from business credit. Many of my clients were not aware that comingling personal and business credit could jeopardize the protection of the corporate veil plus limit the amount of funding their businesses could obtain.

Here are 19 steps to building corporate credit without using a personal guarantee. Please note that these are examples from my business credit practice.

How to build your corporate credit without a personal guarantee

1. Incorporate your business and obtain a federal tax ID number

Your federal tax ID number will be the number that identifies your business and information. It’s just like how your Social Security number identifies who you are for personal credit.

2. Complete corporate conformity

Complete corporate conformity (411 listing, verifications, business license, etc.). Vendors, lenders, and banks will do their due diligence prior to extending credit to your company. Don’t expect to receive credit by skipping these key fundamental steps.

3. Select business classification codes

Avoid selecting codes that will trigger a red flag with business credit agencies and lenders. This can stop your business credit building efforts dead in their tracks.

4. Set up a complete profile with Dun & Bradstreet

Simply obtaining a DUNs number doesn’t cut it. You will need to furnish additional information on your profile to give creditors a complete picture of your business. There are companies that offer no personal guarantee business credit cards and extend credit by invitation only. They purchase targeted lists from the business credit bureaus which you want your company to be on.

5. Apply for vendor lines of credit

Getting business credit can be simple if you do business with companies that specialize in startup companies or businesses with no credit.

6. Pay invoices ahead of the due date

You can increase your PAYDEX score to 90 or higher by simply paying your invoices 10 to 20 days ahead of the due date.

7. Build a solid payment history

While account types and trade lines are factors to building a payment history, keep in mind that a payment track record is the final ingredient. Don’t think that one paid invoice will make your business capable of acquiring no personal guarantee credit lines or credit cards.

8. Monitor your business credit file

This step is a no-brainer and a good habit to adopt for your personal files as well.

9. Get listed with multiple business credit bureaus

Target specific business credit bureaus that cater to your industry on top of the big three.

10. Set up a small business bank account

Before selecting a financial institution for your banking, make a list of the financial products you may need. Consider a credit union or community bank because can be more flexible in today’s economic environment.

More articles from AllBusiness.com:

• 5 Simple Ways to Understand Your Business Credit Scores
• Six Major Types of Business Credit Applications
• How to Build Business Credit with Vendor Credit Lines
• 6 Surprising Reasons Why You Keep Getting Denied for a Small Business Loan
• Can My Start Up Build Business Credit?

11. Establish a minimum "low-5" bank rating

Know what your banks are looking for.

12. Obtain secured business credit cards

Many credit card issuers do not require a personal guarantee, and after six months you can request a credit line increase with no additional deposits.

13. Open a business line of credit

14. Establish a diversity of credit

Build a strong business credit profile by obtaining different account types. This includes trade credit, revolving credit, loans, and leases.

15. Keep proper financials

16. Establish a well-written business plan

A business plan is your blueprint that outlines every necessary component for the success of your business. Enough said!

17. Raise your credit score

Maintain or raise your credit score to 680 or higher. When applying for no personal guarantee credit, a lender or creditor may still require a personal credit check.

18. Build large trade lines with multiple tiers of credit

You can request a credit limit increase usually after six months of good payment history. Before applying for larger tiers of credit be sure to know what the requirements for approval are.

19. Stay informed

Join forums and social networks, and read relevant articles.

Benefit of establishing business credit

Following these steps will provide you with opportunities to establish business credit in the name of your business while protecting your personal credit and personal liability.

FAQs about building business credit without a personal guarantee

Below we have summarized the most important questions and answers on the subject.

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