How to Build Business Credit for a New LLC

Purchase stock with your business line of credit.

Maintaining a favorable business credit file is important for any business. Lines of credit make it easy to finance large renovation projects as well as improve marketing and advertising efforts. A newly registered Limited Liability Corporation (LLC) can obtain lines of credit from a bank, but the business owner must fill out a business credit application and provide the necessary documents for eligibility. Once your business is approved for a line of credit loan, you can begin building business credit and establishing a credit file for your LLC.

Instructions

1. Register LLC with the Department of State. Attach a signed LLC Operating Agreement and the articles of organization for your business.

2. Fill out a line of credit loan with a local lender. Complete the application with your business's name, employer identification number, license number, mailing address and contact number. Outline the expected uses for the line of credit along with a repayment plan for your line of credit.

3. Attach a business plan along with profit and loss statements -- a three- to five-year range is typical -- and business credit reports.

4. Sign over any required collateral. A creditor may require your LLC to back new lines of credit with collateral such as inventory and personal property.

5. Sign and date your business credit application. Give the creditor up to 30 days to process and authorize your line of credit.

6. Build credit. Cover startup costs, purchase inventory, refurbish your building's structure, purchase new office equipment, upgrade your business's computer system, install a security system and pay rental fees. Every billing cycle that your business borrows money from its line of credit and pays it back -- at least the minimum but more favorably all -- it builds credit history.

7. Make on-time payments and pay down your credit line to within 30 percent of your maximum credit limit before the end of every billing cycle. Maintain a 30-percent utilization rate for the most favorable credit rating.

Tips & Warnings

• Maintain records of your credit line agreements.

• To qualify for eligibility, it may also be necessary to provide company owner profiles, rental agreements and partnership contracts.

References

• Index Credit Cards: Small Business
• U.S. Federal Reserve: A Guide to Business Credit
• Kiplinger: Why Your Credit Score Matters
• Find Law: Small Business
• Business Credit Entrepreneur: Insiders 20 Item Checklist for Business Lines of Credit - Avoid Getting Denied
• U.S. Small Business Administration's Business.gov: Business Loans