Unless you have already established credit through another business either off- or online, you will need to do so before being able to borrow money from an established financial institution. Here’s some information on how to start an online business financial history.

The most important thing to remember when establishing credit for your business is that “it is for your business only.” You should never mix personal and business credit. Do not use your personal credit cards or checks. Always apply for new credit cards that are used for your business only. The same thing with a checking account.

First, the financial institutions see your personal and business credit as two different entities. Just because your personal credit is high does not necessarily mean that your business will do well. Also, if your business fails, you surely do not want it to reflect on your personal credit.  Similarly, if you are having problems with personal credit, you do not want that to impact your business credit. 

As discussed on another page on online-business-guide, you need to incorporate or form an LLC when starting your online business. Your Internet business has to be a sperate entity for building business credit.

Sole proprietors and partnerships can be held personally liable for everything their business does, which includes all debts. It is thus not possible to separate personal from business credit.  

In addition, you must obtain a federal “employer ID number” (EIN) and use this identification to register for a separate bank account under the exact legal name of your business.

You need to obtain all required business licenses and permits and have a separate phone number listed for your legal business  name. 

How you start an online business credit file with each of the three major credit reporting agencies is to first buy smaller items on credit, such as office supplies at Office Max or furniture at Staples.  You will want to have about five or six vendors or suppliers who will let you charge minor amounts of credit to your business. They will extend the money to you, and your payment history will be sent to the credit agencies.  

Also, sign up for several business credit cards and charge other items on these cards on a regular basis. Pay your amount due on time. This history will also be sent to the credit agencies.

With time, you will be able to charge larger amounts. Eventually, you will be able to get a small business loan from your local financial institution.