Take Control of Your Credit

Good credit can help your business when you need it the most. Learn how to keep your business's credit as credible as possible.

More than one aspiring movie director will tell you the story of their first film project that began fueled with a little inspiration and a squeaky new credit card in hand. For many business owners, the circumstances aren’t much different. Small business owners also rely on credit, both for lifting their businesses off the ground and for keeping them afloat. According to the market research firm TowerGroup, the number of small businesses using credit cards to fund their operations has shot up 81 percent, to some $254 billion, in the last four years.

Using a credit card to fund your business may be a viable short-term solution, but it certainly won't sustain you for the long haul. Business credit cards should be used responsibly because they often require a personal guarantee, which means you are still personally responsible for the charges incurred.

More than ever, it’s important that small businesses have both good business credit and sound personal credit since financial institutions rely on your company’s credit rating to determine how likely you are to pay your debts. A good rating can have a positive effect on the payment terms that vendors grant you as well as the interest rates that banks apply to your business loans. On occasion, even well-established businesses are obligated to provide personal guarantees on some credit cards or loans. “In my practice, I’ve seen multi-millionaire real estate developers have to personally guarantee loans to new LLCs that are holding their latest real estate project,” says one business blogger. “This is despite the developers having worked with the bank for years and having a track record of success.” This is especially true in an age when banks don’t just hand out cash to anyone with a business idea and the ability to breathe fog onto a mirror.

7 Quick Tips to Build and Improve Your Credit
  1. Keep your suppliers happy. Pay on time, every time.
  2. Don’t use more credit cards than are necessary. Stick with a maximum of two.
  3. Make an effort to limit the number of inquiries into your credit profile.
  4. Stay up-to-date with the licensing expected for any of your business operations.
  5. Keep good books. Maintain updated and detailed financial records.
  6. Purchase products and services from companies that will report your credit history to the major credit agencies.
  7. Review your report regularly. Update details. Fix mistakes.


It’s important to note that building business credit is completely different from building personal credit, although your personal credit is still linked in some important ways. For example, many business credit scores are based on both the risk of the business and the personal credit of the business owner. On the other hand, you don’t have the same credit protection laws with your business credit as you do with personal credit. Unlike personal credit ratings, which allow someone with a low income to get a top FICO score, the best business credit scores are reserved for large, stable businesses with at least several million dollars in sales a year and 50 or more employees.

Small businesses searching for good credit are confronted with the same dilemma that I faced as an eager kid in junior high trying to land my first job at the local pizza parlor. Due to my lack of experience and credibility, it wasn’t until I offered to work the first week for free just to prove my commitment that I found my first opportunity in the business world. Similarly, until you’ve developed a good track record with business credit, many lenders will be reluctant to extend credit to you.

But don’t let that get in your way. You can start small and still build a respectable business credit rating to get the borrowing power your small business needs. The first thing you can do is follow some basic steps to ensure your business appears stable to the business credit bureaus. The big ones are Experian, TransUnion, and Equifax. Some steps include obtaining the proper occupational licenses, properly setting up some sort of corporate structure, and making sure your phone number is registered with directory assistance.

Another thing you can do to get started is to establish a full and accurate business credit profile with Dun & Bradstreet using their small business management utility at smallbusiness.dnb.com. A great resource for additional information on this topic is industry giant Experian, which provides commercial financial information such as credit scores. They just launched a new website for small businesses at BusinessCreditFacts.com.

Whatever your reason for needing credit, there are more sources for receiving small business credit than you might think. The big one is no surprise—the government. Every year, the Small Business Administration makes more than $100 million in small business loans available. You can approach the SBA directly at sba.gov or tap into these funds via most commercial banks.

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