One of the most significant financial mistakes that small businesses make is not building their business credit. As a company owner, you don’t want your personal credit or finances to be linked to and used for business expenses. Therefore, these are a few ways to build your institutional credit and increase your business credit score.

Get a Business License

Your first step is to get a business license. You need to submit business paperwork to your state. However, you should go further. Sole proprietors and partners are responsible for business debts because these business structures are essential extensions of their owners. Corporations create complete separation between the business and its owners. Although you can still build your company’s credit if you have a pass-through structure, it is easier when your business is fully separated from your finances and taxes.

Then, apply for a federal tax identification number so that you can pay your taxes and work with banks.

Start a Bank Account for the Business

Your personal and business finances should be separated as quickly as possible. This requires that you open bank accounts for your business. You should at least have a business savings account, but you will eventually need a checking account as well so that you can pay your debts. Make sure you pay all your business expenses out of these accounts.

Pay Your Bills

Make sure that you pay your bills on time. Every time you are late on your regular payments, you could be reported. Therefore, get your utilities in the business name and make sure you pay them on time. If you need a post office box, use your company name and make your payments before they are due.

Pursue Business Credit

First, you should open files with Experian, Transunion and Equifax. These companies produce credit reports and are responsible for determining your business credit score.

Then, apply for business credit. You may have to get a secured credit card first, but as you pay your bills on time, you should be able to increase your business credit options. However, make sure that your card reports to the agencies you opened accounts with.

Your vendors should also offer lines of credit. Even if you can pay for your supplies immediately, purchasing on credit will increase your score if these vendors report to credit reporting agencies. You may have to request that they report your account and payment history.

It takes time to build a strong business credit score, but when you make the effort to build your credit, you will find it easier to get the financing you need as your company grows.