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Business Credit

Building business credit should be one of your top priorities as you grow your small business. A strong business credit profile can help you qualify for bank loans or other sources of funding at competitive interest rates.

If you’ve been denied a small-business loan, it might be because you have bad personal or business credit. Thirty-six percent of small-business borrowers who get a “no” from creditors are turned down because of their credit scores, while another 30% are denied for new or insufficient credit history, according to a study by the Federal Reserve Banks of New York, Atlanta, Cleveland and Philadelphia.

Borrowers with bad credit might also have higher interest rates, higher insurance premiums and less favorable payment terms with suppliers. You can get a small-business loan despite bad personal credit. But if you take steps first to build your business credit, you’ll qualify for lower interest rates, cutting the total cost of your loan.


Business credit reports are typically created when vendors, suppliers or creditors report a business’s accounts and activity to a business credit bureau. This activity helps to generate the information that informs your business credit scores. Some scores also consider information from the owner’s personal credit file and business repositories, such as the Small Business Financial Exchange.

While they seem to function in much the same way, business and personal credit are not the same. But they serve a similar purpose: to help lenders and vendors determine how likely you are to repay a loan or other financial obligation taken out on behalf of your business. Though some business credit scores consider your personal credit, personal and business credit profiles are separate.

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Understanding Business Credit

Like personal credit, business credit is something you build over time. Business credit considers several factors and is expressed in the form of business credit scores.

Additionally, both business credit and personal credit can affect the rates you might pay for goods and services. For example, as a business owner, you may pay lower insurance premiums if your business credit scores are high. You might also qualify for lower interest rates on small business loans or lines of credit if you have good business credit.

These may all come in handy if you’re looking to negotiate longer terms from vendors, which might give you more space to manage cash flow.

We’ll cover the basics of what business credit is, how it’s used, and tips on how you can build your business’s credit.

Special Considerations

It can take time to build your business’s credit, which is one reason to start early. But having good personal credit can also be important. Especially for small businesses, lenders may check an owner’s credit before offering a business loan or line of credit.

If you have solid personal credit, you might qualify for business loans or lines of credit with favorable rates and terms. Personal loans and credit cards may also be an option, but it’s best to keep your business and personal finances separate unless you run a sole proprietorship. (Even then, separating the finances can make filing taxes easier.)

When you need financing but are working on your business and personal credit, there may be other options, such as merchant cash advances. But read the terms carefully and proceed with caution — financing that doesn’t require good credit tends to be expensive.