How to Establish Business Credit as a Sole Proprietorship

by Felix Ofiwe; Updated September 26, 2017

A sole proprietorship is an unincorporated business owned by a single owner. To establish one, all you need is a DBA (Doing Business As) certificate. Unlike corporations or limited-liability companies (LLC), sole proprietorships depend on the credit worthiness of their owners to succeed. A sole proprietor with great credit history will have an easier time getting lines of credit from banks and other financial institutions to expand his or her business. It is important that, as a sole proprietor, you establish and maintain good credit history. Here are ways to establish business credit.

Items you will need

  • DBA certificate
  • Business bank account
Step 1

Verify information in your credit report from the three major credit-reporting agencies. Contact the reporting agency if you find erroneous information. As a sole proprietorship, banks and other lending institutions will verify your personal credit worthiness before extending business credit to you. Order your credit report free online from Annual Credit Report or Free Credit Report. See Resources below for more details.

Step 2

Obtain a DBA certificate from your local tax office. This establishes you as a sole proprietor. Banks and other lenders won’t do business with you without this certificate.

Step 3

Open accounts with utility companies in your business name and pay your bills on time. These companies report your payment history to the three major credit-reporting agencies monthly.

Step 4

Open lines of credit with office equipment stores in your business name. When you need these office equipments, buy them using your new line of credit and pay the bills on time. These retail stores will report your payment history every month, too, and this helps you build good credit.

Step 5

Join professional associations like Better Business Bureau and local chambers of commerce. Networking through these associations will bring you in contact with your local bank and other business officials who will make the decisions when you apply for credits through them.

Tips

  • It takes time to establish good credit, so be patient. Manage your finances well. Don’t over-extend your business by borrowing more than you can pay and always pay your bills on time.

About the Author

Based in Fresno, Texas, Felix Ofiwe has 20 years experience as editor, reporter, content developer, SEO expert and web editor. He was the editor of African American Focus newspaper and Deputy Editor of Global Pride magazine. He holds a Bachelor of Arts in journalism and earned his web developer certification from Baylor University.