Understanding Business Credit: How to Build Business Credit?

Understanding Business Credit: How to Build Business Credit?

  • July 9, 2020
  • Written by : REIL Capital

Every entrepreneur should aim for establishing business credit and if you don’t know what the term means, stay with us till the end. Here’s the information you need to know about the most important element of the small business loan application.

What’s Business Credit?

It represents a business’ ability to buy goods or resources now and pay for them later. It determines whether a business qualifies for a business loan or not. You may know about your personal credit score but your business will have a totally different credit score.

Credit reporting agencies use all the debt payment records and other financial information about the businesses to make their credit report. Therefore, most insurance companies, creditors, lenders, suppliers, and other organizations evaluating credit use these.

Below we will go through some detailed steps explaining how to build strong business credit.

How Business Credit Differs from Personal Credit?

Personal credit is mostly based on personal finance history. Also, it has a direct link to your social security number. Your business credit score is derived somewhat from your personal credit score with certain other factors involved. A personal credit score is given by credit reporting firms between 300 to 850. Any score over 680 is considered excellent. On the other hand, the business credit score ranges from 1 to 100. Hence, the higher the score, the more are your chances to secure additional capital for your business.

Why is a Business Credit Score Important?

Soon as you are about to start a business. You need to address dozens of details. Due to this, you may forget to pay any attention to your business credit score. However, the business credit score is vital to sustaining a successful business as it can leave a significant impact on your growth and success.

A Business Credit Score can Impact:

Lease securing

Insurance policies

Financing options

Favorable payment terms with suppliers, giving them proof that your bills will be paid on time Protection to your personal credit

How Does a Business Credit Score Work?

As mentioned the range of the business credit score is from 1 to 100. Thus, it is imperative that you maintain a high credit score worthy enough to impress lenders or creditors. It is because this number briefs how likely you are to pay the debt back on time.

The components that may influence the business credit score are:

Credit: Credit utilization, payment history, length of credit history, trends, balance, and credit mix.

Demographics: Years in business, size of the business, and industry risk.

Public Records: Bankruptcy amounts and frequencies, liens, and judgments.

Mixing credit types, paying on time, and always keeping yourself from maxing out on credit limits, all leave a positive impact on your business credit history.

How to Establish Business Credit?

One should follow these steps to establish a business credit score:

  • Apple for a business credit card
  • Work with vendors reporting payments and always pay their debt
  • Incorporate to create a business credit file
  • Separate personal expenses from the business expenses
  • Get an EIN or employee identification number
  • Open a business bank account
  • Establish legal business address and phone number
  • Keep all the information updated with different credit bureaus


In short, a business credit score is essential to get a good amount of additional finance from lenders. Explore our range of small business loans and pick a finance option as per your business credit score.

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