How to Build Business Credit for a Small Business

How to Build Business Credit for a Small Business

Many business owners perceive their companies as personal extensions, a natural reaction considering every business is born from an innovative idea and flourished through dedication and hard work. However, blending personal and business finances can lead to adverse financial impacts for both the entrepreneur and the business.

Setting up business credit safeguards against certain financial and tax risks, affirming the distinction between your personal identity and your business as independent legal entities. Furthermore, a robust business credit profile can facilitate your business’s ability to secure larger loans and bypass the need for prepayment for supplies. Here is how you can start building business credit for your small business.

Incorporate Your Business

If you’re reading this and have already incorporated, it still bears mentioning a significant point about business structure. The entity and the owner are regarded as a single legal unit in scenarios involving sole proprietorships and general partnerships. This setup doesn’t allow for the division of the owner’s personal credit history from the business’s credit activities. Nonetheless, opting to incorporate or set up an LLC paves the way for establishing a distinct legal identity for the business, separate from its owners.

Set Up Trading Lines with Your Suppliers

Vendors frequently offer trade credit, giving you the flexibility to settle your bill days or weeks after receiving your goods. This accounts-payable arrangement can enhance your business credit score, especially if your supplier reports your payments to a business credit bureau.

You can establish trade lines with smaller vendors, like those providing water or office supplies. If these vendors aren’t reporting to a credit bureau, you can still include them as trade references on your account.

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Opt for Lenders Reporting to Business Credit Agencies

Obtaining a small-business loan and punctually meeting all payment obligations can positively impact your business credit score. Nevertheless, it’s crucial to recognize that not every lender shares transaction details with business credit reporting agencies.

For those considering a business bank loan or an online business loan, there’s a strong probability that your lender will document your payment track record. Conversely, providers of merchant cash advances usually refrain from reporting such information.

Should you be in the market for a loan, it’s advisable to question prospective lenders on whether they relay financial behavior data to business credit bureaus. Balance their answer with other loan terms they offer, such as the interest rate, to ensure you make the most informed decision.

Obtain a Business Credit Card

Securing a business credit card from an issuer that reports to commercial credit agencies is yet another strategy to build business credit. For those with a robust personal credit history, obtaining a business credit card could be straightforward, even for startups.

Additionally, using business credit cards can aid in maintaining a clear distinction between personal and business financial transactions. You may also come across a business credit card that provides the advantage of accumulating travel points or cash back on your business’s daily expenditures.


Establishing business credit could be wise for business owners seeking loans or vendor financing eventually. Although personal loans or credit cards can be used for funding operations, opting for small business loans and lines of credit might result in more beneficial terms.