Building Credit for Your Small Business

The importance of establishing a healthy credit history is just as important for businesses as it is for private citizens. Neglecting to do so, most small businesses will fail because opportunities for growth or to improve the business are typically dependent on being approved for working capital loans that can be used to purchase equipment and hire more employees to take their business to the next level. A business’ credit history will demonstrate their ability to responsibly repay their loans and go a long way to reassure banks and other lenders that lending to the business in the future won’t be a heavy risk.

Business Credit Cards

According to the National Federation of Independent Businesses, approximately sixty percent of small business owners used a business credit card in 2011. Business owners who use their personal credit cards to pay for company expenses are making a bad business move. Instead of helping the business, the credit history is benefiting the individual and not the company. While it’s true that the major credit card companies hold their customers personally liable for business credit card use, by using one you will be establishing a credit history in your business’ name.

Business credit cards are most practical for start-ups and small businesses and generally easier to secure than a business loan. Large corporations with annual revenues over $25 million typically qualify for corporate credit cards, commercial loans and other financing options. A small business credit card will provide needed funds at reasonably low rates (averaging 14.74% as of Nov. 30, 2012) and require no collateral, making them a wise choice for a business hoping to build a credit history.

Trade Lines Entries

Many business expenses you’ve paid over time may not be reported to the credit reporting agencies. This activity has value and can be added to your credit reports to increase the depths of your credit history. Commonly known as trade lines, if a company hasn’t submitted the information to any of the three agencies; it’s up to you to take action. Here’s a short list of possible companies that extend credit for your business needs to consider adding:

• Shipping Companies
• Outsourced Marketing
• Office Supply Companies
• Telephone Services
• Website Development and Maintenance

While proceeding to add trade lines, review each report thoroughly for discrepancies. Errors on your reports need to be resolved. Contact the credit reporting agency if a debt is listed that you’ve paid off, a late payment is recorded that never happened, an unknown account is listed, etc. The company whose entry you’re challenging has up to 90 days to respond and defend or remove it from the report. You should resist the urge to make a challenge without proper documentation of your payment.


For an established business, another option that will help to build a credit is to apply for a small loan or line of credit from your local bank. You’ll have a better chance of being approved, if you can come up with a large down payment. Make every payment on time and work to repay the loan ahead of schedule to build a positive history and earn a good credit rating. If you have a bad credit, it will be hard to find an institution where you can get a loan. If this happens, you will need to take up the secured loan bad credit route.

Account Management

When you’ve acquired a business credit card or loan, it’s important to keep a minimum of 40 percent of your credit limit available. Using too much of your limit sends the message, right or wrong, that you have money troubles. Pay the account off every month, whenever possible, to show that you can responsibly handle money. If you must carry a balance, make sure to pay your credit card bill on time every month.

This credit building strategy will help you establish a financial history that will be beneficial in building up or maintaining the business you’ve worked so hard to create. A healthy business credit report will showcase your company’s responsible financial management giving you greater opportunities to access the funds you may need in the future.

Noreen Ruth is a contributor to and a wide variety of financial-related blogs and websites. She specializes in credit and debt-related issues and enjoys educating consumers about the latest rules and regulations, as well as ways to build, improve and maintain good credit. Find additional information on the Wow Credit Cards Blog to stay up-to-date with the latest credit news, business credit cards, reviews and more.

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