The Business Cowboy: Cheap & Easy Way To Build Your Business Credit

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Given the importance of your credit score in today’s business world, it’s almost a shock to learn that not everyone has one. Virtually every company requires some form of financing at some point, but because few businesses have a pristine credit score right off the bat, most cannot get the financing they need without providing collateral or another type of security. Fortunately, there are ways to build your business credit without waiting for an extended period or paying high fees. Check out these simple steps on how you can build your business credit as a small business owner.


What is Business Credit?


Business credit is a line of credit that a lender will grant based on the reliability and financial strength of the business owner(s). Unlike personal credit, business credit does not factor in the owner’s personal credit history. Instead, it focuses on the company’s ability to repay the loan based on its cash flow, assets, and other factors. Business credit is often broken down into two categories: SBA loans and commercial/business credit. Commercial/business credit is further broken down into two categories: asset-based and credit-based. You’ll need to apply for commercial/business credit if your business is new. You’ll likely need to apply for both SBA loans and commercial/business credit if you’re operating an established business.


Why is a Good Business Credit Score Important?


A good business credit score will make it much easier to acquire financing. You’ll probably be able to get a lower interest rate, and you may even be able to skip the collateral requirement. A higher credit score will also make it easier to expand your business by opening up a wider range of financing options. When you apply for a loan or line of credit, lenders will look at your business credit report to see what the risk is in making the loan. The business credit report is different from the personal credit report, so having a strong business credit score can make it easier to get financing. You can have a strong business credit score even if you have a low personal credit score.


3 Ways to Build Your Business Credit


  • Get a business credit card – Credit card companies will report your payment history to the three main credit bureaus—Equifax, Experian, and TransUnion—every month. If you consistently make on-time payments, that will go a long way toward building a positive credit score for your business. 
  • Get business credit – If you are able to get a line of credit for your business, that will go a long way toward building positive business credit. If you have a credit card through which you make regular payments, that can also help your business credit. 
  • Get an SBA loan – SBA loans are great because they are often offered at an interest rate that is lower than normal commercial loans. And, as long as you make your payments on time, that loan will be reported to the credit bureaus as positive business credit.


Business credit is different from personal credit and can be difficult to get if you are new to the business world. However, there are ways you can build your credit, such as getting a business credit card and getting an SBA loan. With these tips from The Business Cowboy, you can improve your chances at getting financing when you need it most.