It can be easier to get business credit with an LLC compared to other types of businesses like a sole proprietorship. Many LLCs, including all multi-member LLCs, are required to have an Employer Identification Number (EIN) for tax purposes, and an EIN is needed to establish a business credit report, according to Experian. A non-LLC business can still get an EIN, but already having it can make the process easier for LLCs.
Establishing Business Credit With an LLC
An LLC is considered a separate legal entity from its owner(s), and it can establish its own creditworthiness and financial history. Once you open any sort of financial product like a loan or a credit card for the LLC, you can start having information reported to the credit bureaus each month, including business credit bureaus. Of course, that’s assuming the lender chooses to report to the business bureaus.
Benefits of Having Business Credit With an LLC
Building good business credit for your LLC can help you qualify for future loans and lines of credit, as well as open up more opportunities for financing because some lenders won’t lend to sole proprietorships. In addition, having business credit can improve your chances of getting new investors or establishing good relationships with vendors or insurance providers.
Keep in mind that when you apply for a business credit card, even if you have an LLC, you will likely still need to provide a personal guarantee to pay back any debts that the business cannot, and the card’s issuer will consider your personal credit and income during the application process.
This answer was first published on 01/19/24. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
FAQs
Yes, a newly formed LLC can get a credit card, though approval often depends on the business owner's personal credit score, as many business cards require a personal guarantee.
What credit score does an LLC start with? ›
This EIN allows your LLC to open bank accounts, apply for loans, and build credit in its own name. An LLC starts with no credit score. Just like an individual, an LLC must build its credit over time by engaging in responsible financial behavior, such as taking out loans and lines of credit and making payments on time.
Is it easier to get business loan with LLC? ›
Yes, it can be easier to get an LLC loan. Some lenders won't lend to sole proprietors. Establishing your business as a legal entity can make it easier to access financing and could even help lessen lender bias, as a recent study in the Journal of Marketing Research suggests.
How long does it take for an LLC to get a credit score? ›
Within a three-year period, all the financial activities that are linked to a company will be part of its credit history, including its bank account, credit card use, supplier payment history, etc., as reported to the business credit reporting agencies, Equifax, Experian, and Dun & Bradstreet.
What is the easiest business credit card to get? ›
Easiest business cards to get
- Ramp Corporate Card.
- Brex Corporate Card.
- First National Bank of Omaha Business Edition Secured Mastercard Credit Card.
- Capital One Spark Cash Plus.
- Bank of America Business Advantage Unlimited Cash Rewards Secured Card.
- Chase Ink Business Unlimited Credit Card.
Whether you operate as a limited liability company or corporation, your business has the ability to establish a credit file separate from you as an individual. When you register a business (LLC, LLP or corporation) it becomes recognized as a separate legal entity with the ability to enter into contracts.
How to get credit through LLC? ›
To establish business credit, you may first need to take the following steps:
- Incorporate your business or form an LLC (limited liability company). ...
- Get a federal employer identification number. ...
- Open a business bank account. ...
- Get a dedicated business phone line. ...
- Register with Dun & Bradstreet to get a D-U-N-S number.
What's the difference between business and personal credit? Your personal credit is connected to you by your Social Security Number. Your business credit history is linked to you by your Employer Identification Number (EIN) or Tax ID Number, which is how the government recognizes your business for tax purposes.
How much credit can a new business get? ›
A typical business line of credit ranges from $5,000 to $500,000, but the amount a business is approved for varies based on its financial history and creditworthiness.
Can a new LLC get an SBA loan? ›
SBA Business Loan for New LLC: Your Options. Two primary SBA loan options are available for LLCs and other small businesses in need of financing: the SBA 7(a) loan and SBA 504 loan. Each has specific ways funds can be used, and they offer different loan terms and loan limits.
You can find LLC loans from banks, credit unions, online lenders and US Small Business Administration (SBA) partners. Here's a closer look at these loans, including how they work and tips for finding the best option for your business.
How to get business credit fast? ›
How do you build business credit fast? Registering your business and applying for a business credit card can help you start building business credit right away. As your business grows, establish trade lines with your suppliers and make sure to borrow from lenders that report payments to business credit bureaus.
How long does it take to build LLC credit? ›
Can You Get Business Credit Right Away? While it takes about 12 months to build solid business credit and as many as three years to build a comprehensive credit profile, you can start building at least some business credit within the first six months.
Can you build business credit in 30 days? ›
Similar to personal credit, most business credit score goals can't be reached in 30 days. It is good to set those goals though and work towards them. However, you can make solid progress and give your company the momentum it needs within this time frame.
Do LLCs have FICO scores? ›
Yes, a limited liability company (LLC) has a credit score. A limited liability company is a legal entity that is separate from its owners, and as such, it can establish its own credit history and credit score.
What credit score do I need for a business credit card? ›
Most business credit card issuers do a hard credit check when you apply, and you'll typically need good to excellent personal credit (generally a FICO score of 690 or above) to qualify. This is especially true for startups, which can't lean on years of business success to bolster their application.
Can a start up business get a business credit card? ›
Yes, you can get a business card if your business hasn't yet generated any income. Issuers understand that new businesses may not have business income yet, so be honest if you're just starting out and haven't generated income.
Should you put your LLC on your business card? ›
Having it in your name allows clients to see that they are dealing with a legal entity and would be suing a business rather than you personally. Having LLC in your business name lets potential customers know that you have taken the time and followed the appropriate steps to make your business legitimate and legal.
Does my LLC business credit affect my personal credit? ›
If your LLC has debts taken out in the company's name, only the LLC's business credit report will be impacted by whether you repay your debts on time. An LLC loan will only impact your personal credit if you cosign or guarantee it. If you don't do so, your personal credit report will remain unaffected.
