How to build small business credit

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How to build small business credit

A business with a good credit score can have access to loans with better terms and lower interest rates. Small business credit also signals to new vendors in B2B transactions that the business is reliable.

All types of business legal structures, including sole proprietors, can establish a business with its own credit score. How to build small business credit requires only a few simple steps. With this, small business owners can establish small business credit and position their company for new opportunities.  The average business needs only 12-18 months to improve their credit score. Here is how to start today! 

What is business credit?

Business credit represents the likelihood of a business to default on a loan. Unlike personal credit scores, business credit scores are on a scale of 0-100. A business can also build a good credit score more quickly than individual consumers. 

Businesses can earn a good credit score by taking one or more lines of credit and paying bills on time. Businesses also need to keep clear public records and avoid legal trouble. 

How do I qualify for small business credit?

To qualify for small business credit, a business will need to prepare with some basic essential documents. You will need a business name and address. Unless it is a sole proprietorship, you will also need an EIN, which is a tax identification number for the business. 

To qualify for small business credit, a company will also need to provide information on the industry, number years in business, cash flow, and revenue.

Why building small business credit is important

Building business credit can open additional opportunities for small businesses, including better loan terms and low or no down payment.

Better loan terms

A good small business credit score means the company is more likely to qualify for loans, opening additional opportunities for expansion and company growth. 

Most lenders base loan terms on credit score, along with demonstrated revenue.  A company with a good credit score can receive better loan terms and lower interest rates. For small businesses looking for a substantial loan, building small business credit can lead to significant savings.

Vendors may not require a down payment

When purchasing products or services in B2B transactions, vendors are more likely to offer a no down payment option to business with a good credit score. Building trust in business, especially with new vendors, starts with a good credit score. 

Separating personal and business finances 

Having a business credit score will help separate your personal finances and credit score from business credit. If a business does not have a credit score, lenders or vendors will often ask for your personal credit score. If the business has an established credit score, that will usually be sufficient. 

If you are working to build your personal credit score, a business credit score is faster to build. In addition, separating your personal finances from business finances can help to legally protect yourself and the business. 

8 steps for building small business credit

Wondering how to build credit? It is simpler than you’d expect. With just a few simple steps, your business can be on its way to building good credit

Establish your business

First, your business needs to be established as a legal entity. There are different legal structures to choose from. An LLC for a sole proprietor or a partnership, an S-corporation, or a C-corporation are the most common structures businesses choose. In the process of registering, you’ll need to choose a business name, and business address. 

Register your business and get an EIN

Once you have established the legal entity you will need to register the business with the IRS to receive an Employer Identification Number (EIN). This will allow the business to open bank accounts, apply for credit cards, and hire employees. 

Open a business bank account

An important step for building business credit is to separate personal finances from business finances. Opening a bank account in the name of the business and start using that account for business income and expenses. 

Build relations with vendors

Building relationships with vendors and establishing trade lines with suppliers is one way to build business credit. While not all vendors will report to credit bureaus, paying accounts on time is a good business practice that will build trust and a reputation of reliability. Staples, Uline, and Quill all report to credit bureaus. Check with your vendors if they will also report.

Get a business credit card

A business credit card is one of the fastest ways for a business to build credit. Pay the card on time and in full for maximum credit score growth. Used responsibly, a business credit card is a convenient way to pay bills and build credit. 

In addition, some cards will offer added perks, like cashback rewards, signup bonuses, or other incentives. Shop around to find the card that offers the best rewards for your business. 

Pay your credit card early and often

It deserves its own point. While credit cards can build business credit quickly, late payments or debt can also harm business credit. Pay your credit card bills on time and keep your credit utilization low to use credit cards as a tool for business growth. 

Utilize small business loans

Credit diversity also increases credit score. Utilizing small business loans can help build credit, if used responsibly. Apply for a loan that you can pay back with your current cash flow. Look for investments that can lead to business growth and expansion. Once again, be sure to make all loan payments on time to keep a good credit score. 

Keep your records clean

Your business credit report does not only include credit card and loan repayments. It will have any public records filed in your business name. This included bankruptcies, judgments, or liens. Keeping your business legally up to date and without issues is important. Make sure to file all required reports with the IRS and respond to any other legal issues appropriately. 

Small Business Credit for Company Growth

Learning how to build small business credit can open new opportunities for many businesses. Whether you want to apply for a small business loan or get a line of credit, establishing credit for business will increase opportunities and can lead to loan improved terms. 

In just eight steps and a few hours of time, your business can be well on its way to an excellent credit score. With a good credit score, a business is primed to apply for loans, establish trade lines and build for future growth and expansion.  


Is it hard to get a small business line of credit?

Whether you can easily get a business line of credit will depend on the business credit score, time in business, and monthly or total business revenue. An established business with a good credit score and stable revenue, without other limitations, should be simple to obtain a business line of credit.

How do I build credit with an EIN?

You can build credit with an EIN by opening credit cards or other revolving lines of credit with the EIN for the business to build credit. Then pay off the credit in full each month before it is due to start building a good credit score. Generally building a good business credit score is faster than a personal credit score.

Is my EIN connected to my SSN?

An EIN is like a social security number for a business. For small business owners like sole proprietors, it is possible to file for income paid both to the EIN and the SSN together. However, you should consult an accountant or tax expert for your individual situation.

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