4 Reasons Why Your Business Needs to Accept Credit Cards

As a business owner, you have many responsibilities; making sure you have a great product to offer your customers, ensuring you have the right staff, abiding by rules and laws, marketing your business to new clientele, paying bills, and so on.

Why add one more thing to your never-ending list of things to do when it comes to accepting credit cards? The benefits of accepting credit cards far outweigh the cons.

Below are the top four reasons why your business needs to accept credit cards right now.

  1. Increase revenue 

In a business, increasing revenue is critical to success and keeping your doors open. Perhaps the most important benefit of accepting credit cards is that it can help increase your revenue.

  • When using credit cards, consumers spend 12 to 18 percent more than when using cash for purchases
  • According to a survey conducted by Intuit, 83 percent of small businesses that accepted credit cards saw increased sales. Of those surveyed, 52 percent made at least $1,000 more a month and 18 percent made at least $20,000 more a month!
  • Consumers are more inclined to make impulse purchases when paying with credit cards, including both frequency of purchases and the dollar amount of those purchases

By accepting credit cards, you are easily creating the possibility of increasing your bottom line, which is something every business strives for.

  1. Make your customers happy 

What would your business be without your loyal customers? Don’t you want to make their experience with your business the best it can be?

According to Visa, credit cards are now seen as the most efficient payment method, surpassing paper checks and cash for the first time ever.

Accepting credit cards is becoming the new norm. If your customers want to pay with a credit card, but your business doesn’t accept them, they are more likely to take their business elsewhere.

  1. Attract new customers 

Business owners often find attracting new customers a huge obstacle. However, you can attract new customers by hardly lifting a finger if your business accepts credit cards.

  • Consumers are more likely to shop at your business if they know you accept credit cards
  • Fifty one percent of American adults under the age of thirty hate paying with cash, no matter the amount. The trend is continuing through different age brackets
  • Word of mouth advertising is huge! About 84 percent of consumers take recommendations from people they know, while 68 percent of consumers are influenced by opinions posted online

When you accept credit cards, you make your customer’s lives easier, and enhance their shopping experience. Therefore, your customers are more likely to promote your business and their positive experience to new customers!

  1. Boost local economy 

When consumers pay with credit cards at your business, you are helping your local economy grow and thrive.

  • In 2016, 112 million consumers shopped and dined small on Small Busines Saturday, more than ever before. This is a 13 percent increase from 2015
  • When consumers shop at small businesses, more money goes back into the community. About 48 percent of purchases at local independent businesses go right back into the community, compared to less than 14 percent of sales made at chain stores.

This all comes full circle. By accepting credit cards, your business will increase its revenue, and your customers are more likely to spend more. Your customers will be happy with their experience and spread the word about your business, so you can attract new customers. As your revenue and customer base grows, you will help your local economy, and increase your revenue!



Business Credit Vs. Personal Credit Reports: Why You Need Both

Personal credit is something you should be familiar with as a business owner. Having good credit, or being “creditworthy,” makes getting financing easier when you need it. But do you know what your business credit report is and how it works?

Business credit is like personal credit in many ways. But they are not exactly the same. They are made up of different data and have different uses.

Here are a few details included in business credit reports:

  • Ownership information.
  • Subsidiaries.
  • Financial information.
  • Risk scores.
  • Liens or bankruptcies.

The credit report procedure begins when a company obtains a federal tax identification number. Unlike consumer credit reports, business credit reports are available to the public.

Business credit represents a company’s creditworthiness. And it can help with financing, acquiring a business credit card, and even doing business with suppliers. Here are some of their distinct differences you should keep in mind.

Identity numbers

Your Social Security Number relates to your personal credit history. But the IRS assigns an Employer Identification Number to your business. This distinguishes your company’s identity from you as its owner. Your EIN is associated with your business credit history. Because states are in charge of business registration, companies registered in different states can use the same name. To avoid confusion, the IRS gives EINs that identify U.S. firms. Businesses use their EIN to file taxes, get loans, and get licenses. It is made up of a nine-digit number, like the Social Security number, with the format: XX-XXXXXXX. While sole proprietorships don’t need an EIN for tax purposes, they can still get one to establish business credit. SSNs (and ITINs) can be used for business purposes if you own a business that isn’t required to pay taxes separately from its owner.

Factors affecting credit scores

Payment patterns, credit card usage, loan usage, and other types of credit can impact personal credit reports and scores. Business credit history considers the same financial information as personal credit history. It also includes additional factors such as:

  • Vendor credit history.
  • Historical data.
  • Business size and payment performance.

What determines credit scores? The FICO personal credit score has five major components:

Payment History (35%)

Your payment history to lenders is the most crucial component in a FICO score. The first thing lenders look at is your ability to pay on time.

Amounts owed (30%)

The whole point of working hard to improve your credit score is to borrow money when you need it. You don’t have to be a high-risk borrower because you owe money. But maxing out your credit cards will harm your FICO score.

Credit history length (15%)

It takes time to get a strong credit score. In general, the longer a person’s credit history, the higher their FICO credit score.

Credit mix (10%)

There are several types of debt, such as retail cards, credit cards, car loans, etc. FICO cannot establish your credit score unless you have some credit. So, to start (and improve!) your credit score, you must use credit cards and installment loans responsibly.

New credit (10%)

According to FICO, opening many new credit accounts in a short period raises your credit risk. Personal credit scores range from 300 to 850 evaluated by FICO or VantageScore. And business credit ratings are expressed in many ways, depending on the credit reporting institution and index used. An Employer Identification Number (EIN) allows the IRS and credit reporting bureaus to track businesses. If your small business has an EIN, the first step to establishing your score is to register with the following;


Equifax scores your small business credit in a range of 101 to 992 on the Small Business Credit Risk Score for Financial Services. And a range of 101 to 816 on the Small Business Credit Risk Score for Suppliers. They determine credit scores based on: Payment history. The ratio of available credit. Age and size. Demographics. Public records.


Experian’s corporate credit score considers the same elements as Equifax. Experian collects information from lenders and vendors who have extended a credit line or loaned money to your company. They compare it to peers in your sector.

Dun & Bradstreet

The PAYDEX report ranks your business credit based on your company’s:

  • one-year payment.
  • history.
  • financial stress scores.
  • other data from at least four vendors.

Equifax, Experian, and D&B all generate business credit ratings besides credit reports, with scores ranging from 0 to 100.

Meanwhile, the FICO Small Business Scoring Service (SBSS) examines small business credit and runs from 0 to 300. The higher the number, the more creditworthy the company.

Bottom line

As a business owner, you need to create a distinct credit profile for your company. Lenders will rely on your private credit profile to determine credit risk if you don’t have a business credit profile. This might limit your ability to borrow for your business. Establishing business credit and distinguishing it from your personal credit are crucial steps for the growth of your business. It not only allows more opportunities for your business, but it also provides security for your personal assets, separate from your business.

Business credit might be more difficult to get than personal credit. It’s vital to understand the differences early on to ensure your company’s long-term viability.



Simple Ways to Establish Business Credit

It’s practical to learn how to establish credit for your business. However, before you start applying for loans, weigh the costs as well as the impact on your business. Once you are approved for a loan, there is no turning back.

Planning is crucial when it comes to operating with loans. You should consider how it will benefit your business and how you will make payments. Keep reading for a breakdown of business credit: its purpose, how to get it and the benefits to your business.

So what is business credit?

Similar to personal credit, business credit refers to the credit you can get to fund purchases. In a business, this might include financing and loans for inventory, equipment, or supplies. When you establish a good credit rating in your business, it will be easier for you to borrow money when your business needs it.

Poor credit scores may limit your ability to secure contracts. You could face higher loan interest rates, limiting your company’s growth opportunities. But a solid business credit file can put your potential clients, lenders, and suppliers at ease.

What is the purpose of business credit?

The credit of your company can impact many areas of your business, including:

  • Your loan eligibility or interest rates.
  • Insurance premiums.
  • Vendors and suppliers’ net conditions and credit limits.
  • Your ability to raise money with potential investors.
  • Your eligibility to contract with other organizations.

Benefits of business credit

You will build your business credit over time. Your credit rating takes into account a variety of elements and is expressed in the form of credit scores for businesses.

Your business credit report is created when your accounts and payment activities are reported to business credit agencies. As a business owner, your personal credit file might also be taken into account.

Your company will benefit from a strong credit history in a number of ways:

  • When borrowing money, you might be approved for larger loan amounts and lower interest rates.
  • Business insurance may be less expensive.
  • Suppliers might be open to offering your company better deals.

Ways to establish business credit

It doesn’t have to be difficult to establish good business credit, but it does take some planning and forethought. The sooner you start establishing your credit, the better. Here are a few tips to get the most out of your credit-building efforts.

  1. Set up a separate entity for your business.

Separate your personal and business expenses by creating credit cards, lines of credit, and bank accounts under your company’s legal name. This will simplify your bookkeeping and taxes. A separate business account will also help you establish a history with your bank. You’ll come to them as an existing customer if and when you seek credit.

  1. Register your business.

Lenders and potential business partners will need this information in order to examine your company’s credit history. Have your registration documents handy before applying for a loan.

  1. Request an employer identification number.

You’ll need this unique identifier for your company for the purposes of tax reporting. This data is also crucial if you want to convert your company into a corporation or if you want to open a bank account in your company’s name.

  1. Pay on time, every time.

By paying your bills on time, you demonstrate that you are trustworthy and capable of efficiently managing and repaying your debts. Late payments, even if only a day late, will have a negative impact on your business credit rating. Have a structure in place to make your payments on time every month. Prepay, or pay early, whenever possible.

  1. Monitor your credit.

Mistakes happen. Keep clear records and check your business credit reports on a regular basis so you can catch errors early. If you see something that doesn’t match, register a complaint with the reporting agency.

The bottom line

Just like your personal credit score, it’s important to build and maintain healthy business credit. By making good choices, you can develop a credit rating that will allow you to get the funding you need to grow your business to the next level.

Start early and keep consistent in your credit-building efforts so you keep your financing options open.



Why You Should Stop Making Excuses and Start Building Your Business Credit

Your business credit score is a measure of its likelihood to honor its financial obligations. As such, this seemingly innocuous figure will significantly affect your ability to access credit – as well as the interest rates you pay.

It therefore makes good sense to build this score as rapidly as you can, but companies frequently make excuses and find more important things to focus on. This can be significantly damaging to their longer-term prospects.

Excuse 1: Business credit scores don’t matter that much

Really? Banks, landlords and suppliers wouldn’t agree with this. In fact, they’ll use your credit rating to decide whether or not to do business with you, and on what terms.

So, if you’re willing to pay inflated interest rates, pay upfront for your stock and rent second-rate premises, keep on convincing yourself that your credit score counts for very little.

Excuse 2: I don’t need to borrow, so what does it matter?

While most businesses need to borrow in order to start up, many are self-funded. However, even if you don’t need a loan today, doesn’t mean you won’t require an injection of capital tomorrow.

You should also bear in mind that even the best funded and most profitable businesses can hit a sudden cash flow crisis, and without a solid credit score, you could struggle to get the money you need to dig yourself out of trouble.

Excuse 3: Startups can’t build a credit score anyway

It is true that banks generally won’t lend to new businesses, preventing them from building their credit score in this way. However, suppliers and vendors are often prepared to offer short-term financing in the form of trade credit, which allows you to pay for orders 30 or 60 days in arrears (post invoice) rather than via cash on delivery or a pro forma invoice.

Make sure you pay on time and in full and your credit score will start to build, enabling you to negotiate even better terms of trade (and obtain a bank loan if you need one).

Excuse 4: I can’t build a business credit score because of my poor personal credit

There is some degree of truth in this: if you have personal credit problems and no business credit score, you could struggle at first. However, when banks won’t lend, alternative lenders often will, applying quite different acceptance criteria, so you can still borrow and still build your business credit score.

Excuse 5: I don’t need a business credit score – look at my great personal credit!

The flip side of excuse four, this argument suggests that a good personal credit score obviates the need for a business score. However, research conducted by the Small Business Administration suggests that a creditworthy company can obtain between 10 and 100 times as much credit as an individual.

Also, bear in mind that mixing your personal and corporate finances can cause terrible problems for you if the business hits trouble.

Excuse 6: I simply don’t have the time

This excuse brings us back to where we started: you should never consider yourself too busy to build your credit score.

Make sure your suppliers report your positive transactions to the credit bureau so that your score continues to build and build, and make certain you adhere to agreed terms of credit and repay any borrowing on time and in full. Your business could depend on it.



Why Every Entrepreneur Should Open a Business Line of Credit

Cash flow is one of the top concerns for small business owners and entrepreneurs, according to a recent report on the state of small business. That’s because having consistent cash flow is a necessity for success in any field. Unfortunately, the ebbs and flows of business, slow paying clients, operating expenses and other factors can create the occasional cash squeeze. This is where a business line of credit enters the picture.

Here’s why every entrepreneur should open a business line of credit:

1. A business line of credit is flexible “revolving” capital

A business line of credit functions like a business credit card, except that you can access cash. This makes use of funds that are much more flexible, as you can utilize the money for basically any business need, from buying inventory to reducing other debts to paying employees.

A business line of credit differs from other loan products in that it’s considered to be revolving capital. You don’t get a lump sum of cash upfront, like you do with term loans. Instead, you’re free to access the money as you need. Your credit limit replenishes as you repay what you borrowed.

For example, if you’re approved for a line of credit of $50,000, and you withdraw $10,000, your remaining available credit will be $40,000. Once you repay that money, your available credit will be back up to $50,000. In this sense, as long as you consistently make payments, you’ll have access to a supply of money. That comes in handy when the unexpected occurs.

2. A business line of credit can be much more affordable than other financing products

A business line of credit usually has competitive rates and terms, with average interest rates spanning from 7 percent to 25 percent. This means it’s often a more affordable form of funding than invoice financing, equipment financing, a business credit card and even short-term loans.

Of course, the exact rates and terms you get depend on your credit, revenue, time in business and other factors. Obviously, if you have an established business with consistent revenue, the more likely you are to get a high credit maximum at attractive rates and terms. Be sure to compare with other options before agreeing to an offer.

Additionally, you only pay interest on what you withdraw. So, when business picks up and you don’t need to tap into your credit line, you won’t be charged interest.

3. A business line of credit keeps you in control

Few financing options offer you control like a business line of credit does. Not only do you get to use the funds as you need and see fit, you also don’t have to meet the demands of lenders and investors.

For example, it’s alarming that many entrepreneurs that build successful companies actually aren’t in a leadership position when the business goes public. According to research from Noam Wasserman, a business professor and expert on entrepreneurialism, for startups in the late 1990s and early 2000s, only 50 percent of founders remained the CEO after three years into the venture. This is mainly because investors insisted they relinquish control.

So, while going to investors for capital can lead the business to great success, it can also lead to conflicts with managing your company. Conversely, a business line of credit gives you funding — without having to answer to others. This way, you can build your business in the way you’ve dreamed.

4. A business line of credit has a relatively easy approval process

A line of credit is a solid and accessible financing product for young businesses as well as established ones. Generally speaking, you only need to be in business for at least six months and have at least $50,000 in annual revenue. Keep in mind, of course these terms depend on the strength of your business.

Also, it’s possible to get an unsecured line of credit, which is backed by a personal guarantee instead of collateral or a deposit. This takes a lot of risk out of borrowing for you, personally. However, you should note that unsecured lines of credit may come with a higher interest rate and/or stricter qualifications.

If rates are much better on a secured line of credit, opt for that instead. You can back lines of credit with equipment, invoices and other business assets to get approval and lower rates.

5. A business line of credit works well with other financing options

Different loans work well for different things. As Marco Carbajo, a business credit expert, notes, a business line of credit “provides companies the flexibility needed to meet their short-term funding needs. When the need for cash is there, funds are there.”

Since a business line of credit keeps you secure in the short term, it works well with financing products geared for the long term.

For example, a term loan from the SBA can provide a lump sum of cash to use for business expansion over the next five years or longer. During that time, a line of credit can serve as a supplement when daily cash needs arise.

With a smart loan combination, you can ensure a lack of capital never holds your business back. This allows you to focus on what matters: funding a successful, sustainable company.

Take control with a business line of credit

No loan option is perfect. But there are reasons why a business line of credit is one of the sought-after financing products for businesses. It’s flexible, affordable, accessible for most, and gives borrowers more control.

As long as you do your due diligence and compare options, you can benefit from opening a line of credit. Considering combining with other financing products if needed. You’ll meet all your funding requirements — and you’ll be able to get going on building your business.



Can You Get a Business Loan with Bad Credit?

Let’s say you’ve identified an opportunity for your business. It might be a bulk deal on inventory, a necessary equipment upgrade, or a great space for a second location. There’s just one problem: You don’t have the cash available to take advantage, and you have bad credit.

But is all hope lost? The short answer is no. Your options, however, may be limited. The trick is deciding the best choice for your needs from a slim selection.

Typically, an entrepreneur with good business credit (and good personal credit) can choose from a wide range of small business financing options. They might apply for an SBA loan, or a line of credit with generous repayment terms.

If you have bad or little credit, however—and there are many reasons why that might be the case—you’ll need to take a two-pronged approach. The first step is to find what makes sense among the small business loans available to you; the second is to work toward improving your credit so you can get a better deal the next time around.

Let’s go through the basics of business credit, what bad business credit affords your business when looking for a loan, and how to work on your score.

What is business credit?

In addition to a personal credit score, most established businesses have a business credit score, as well.

Your business credit score is a number (represented most often, but not always, on a scale from 1 to 100) that takes into account factors like your credit utilization score, payment history, length of credit history, public records that include bankruptcies and judgments, and company size.

Different business credit bureaus will take different factors into account and weigh them differently, so your number can vary across reports.

This number tells lenders and creditors whether they can trust your business to repay a loan. If your score is good (above 75 on the 1 to 100 scale), then they’ll be more willing to extend you a loan with favorable repayment terms. If your score is bad (typically below 50), then they’ll be much less likely to do so.

There could be a few reasons why you have a poor business credit score. Maybe you haven’t been trying to build it up by making payments on a business credit card, or your last business venture struggled and you failed to make payments to vendors. Your score follows you, so even if your newest business is growing and successful, you’ll still need to contend with issues stemming from your score.

What business loans can I get with bad credit?

If you have a bad business credit score, the elite business loan options likely won’t be available to you. The same goes for bad personal credit. Most SBA loans products, for example, are only available to business owners with excellent personal and business credit.

Depending on a few factors, however—such as the consistent profitability of your business and your relationship with your lender—you may still be able to qualify for an affordable loan product.

Here are your options for business loans you can still get with bad credit:

Short-term loans

Today, many business owners can qualify for a short-term loan through an alternative or online lender. These loans are typically paid off within 3 to 18 months (as opposed to 3 to 10 years, which is standard for long-term loans) via weekly or even daily payments.

The drawback to short-term loans: They are expensive, especially compared to long-term loans. They typically have high APRs, and the frequency of payments means your cash flow could be hampered if you’re not careful. If you need a loan, however, and you need it quickly, you can sometimes get approved for these loans in as little as one day.

Short-term lines of credit

A short-term business line of credit is typically a “revolving” form of credit: Like a credit card, you have a pool of funds you can draw from as needed, paying back each draw individually, without needing to reapply each time as you would with a loan.

Again, like loans, short-term LOCs come with higher APRs and shorter repayment terms than long-term LOCs, making them a flexible but more expensive option than what you could get with good credit. For both short-term loans and lines of credit, the lender is willing to take on more risk in exchange for your frequent payments with high interest.

Invoice financing and factoring

If you are waiting on clients to pay off your invoices—and find that constantly doing so weighs on your cash flow and affects the bottom line—you can actually use those outstanding invoices to access immediate capital from lenders.

The invoices act as collateral on a cash advance: Lenders typically offer you 85 percent of the outstanding invoice amount upfront, then supply the remaining 15 percent once the customer pays your invoice in full. A lender might charge you a flat fee (typically around 3 percent), and then an additional percentage point each week that the invoice remains unpaid.

Similarly, some lenders also offer invoice factoring, where you essentially sell your invoice to the lender for a lesser total amount, and they take over the collections process from your customers. You’ll receive less money than for invoice financing, but your obligation to recoup what’s owed is gone. (On the other hand, customers may find it unsettling to deal with this new third party).

Some invoice financing lenders will review your credit, and others won’t. Either way, they probably won’t ask for personal collateral, as the invoice itself is sufficient collateral.

Equipment financing

If you’re seeking financing for a very specific need—namely, to buy new equipment—then equipment financing may be the perfect solution.

With equipment financing, a lender or even the seller of the equipment extends you the money to buy what you need, with the equipment itself serving as collateral. You then pay that sum back, plus interest and fees, over time. Then, once you pay off your loan, the equipment is yours. Because this type of loan is self-collateralizing, lenders may be more willing to approve applicants with less-than-stellar credit.

Business credit cards

Most business owners should have a business credit card, and not just for the rewards and perks that come with many cards: They can also act as a small, short-term form of financing.

If you think about it, putting a purchase on a credit card is like taking out a small loan for the price of that item, which you have a month to pay off without accruing interest. Depending on your credit card rates—which may be high if your credit score is low—you may also find paying off your purchases over time to be an affordable option.

If you have bad credit, you may need to start with a secured business credit card, where you put down a cash deposit to “secure” the card. After some time spent responsibly using your secured card, your score should improve to the point where you can use an unsecured, or traditional, business credit card.

Merchant cash advance

You can also look into merchant cash advances, where lenders advance you cash, which you pay back—plus fees—from daily credit card sales. MCAs, however, are notoriously expensive, and should only be considered an absolute last resort for small businesses.

How to improve your credit

Whether your personal or business credit is an issue preventing you from obtaining better loan options, your way forward is simple: Engage in responsible spending practices and demonstrate that you’re now a better option to lend to.

Getting a credit card (even an unsecured one that reports to the credit bureaus) is a great way to get started. Use it to make small purchases that you can pay off on time, every month.

Little by little, your credit score should improve, and you can start taking on better loan options as needed. Paying those back on time as well will continue to improve your score, until you can qualify for the kind of lending options that were previously out of reach, such as long-term loans, lines of credit, and SBA loans.

When it comes to getting a business loan, the door is rarely completely closed to entrepreneurs and small business owners. Though you may have fewer options with bad credit, the right financial solution can help you on the path to growth. If you have the cash flow and profitability to take on one of the above business loans, do so responsibly and you’ll see your credit improve month after month.



4 Things You Need to Know About Establishing Business Credit

Establishing a strong business credit profile is an important factor in how a business’ creditworthiness is evaluated when applying for a small business loan. Granted, different lenders have different thresholds for creditworthiness, but the business owner with a good credit profile will have more options available than a business owner with a weak profile.

With that in mind, here are four things you need to know about establishing business credit:

Your personal credit score matters

I know your personal credit score doesn’t say anything about how your business meets its financial obligations, but it does tell a potential lender a lot about you and how you meet your obligations. For most small business owners, your personal credit score is always going to be part of any creditworthiness evaluation.

Although they don’t all require the same standard, your personal credit score often acts as a go/no-go metric lenders look at to determine if they will even consider your business loan application.

For example, most banks prefer to work with business owners with a personal score in the 700s, and typically won’t go any lower than 680. The SBA’s minimum threshold is a little lower. They will work with borrowers who have a score of around 650. Many online lenders have a threshold of around 600, but some alternative lenders will even go as low as 500.

Even if a lender will accept a lower personal credit score, there will usually be a cost to the borrower. The lower your score, the more you will likely pay in interest and the less favorable the terms will be. The lowest rates and best terms are typically reserved for borrowers with the best credit scores.

We saw this even with the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) earlier this year. Many borrowers complained about loan applications that were rejected because they didn’t meet the acceptable threshold. This happened despite the fact that the SBA was making allowances for many small business owners with less-than-perfect credit profiles.

Building a strong personal credit score starts with regular (read monthly) credit monitoring. It’s human nature to positively impact the things we pay the most attention to, so if you want to build a strong personal credit score, you need to pay attention to it.

Your business credit is really a collection of scores

Although there are individual scores associated with business credit, like the D&B PAYDEX Score or Experian’s Intelliscore, your business credit is really the reflection of a collection of scores. Most business credit profiles will include information about how your business does compared to other similar businesses in your industry, of your size, and your annual revenues.

The business credit bureaus also evaluate your business based upon credit risk and often make recommendations about the amount of credit they would offer your business based upon all these factors—with individual scores, or ratings, that reflect how your business stacks up in these categories.

Business credit is one of the most misunderstood things a business owner needs to pay attention to. And like your personal credit, it’s also important to monitor your business credit if you want to make a positive impact in what’s reflected in your profile. Fortunately, building business credit isn’t difficult, but it does take effort and doesn’t just happen.

Slow and steady wins the race

There really isn’t a shortcut to building a strong business credit profile, but following good credit practices over time will improve your score in relatively short order. That being said, accessing business credit can be a challenge for idea-stage or very early-stage startups.

Nevertheless, there are some things you can start doing right now that will help you build a good business credit profile:

  • Make sure the information the business credit bureaus have about your business is accurate and up-to-date: In addition to the credit history reported to the bureaus by your creditors, there is information culled from the public record included in your profile. For example, your business name, address, the industry you’re in, along with other publicly available information that can be searched at the county or state offices where your business is located. Something as simple as a misclassification of your business could put you in what a lender might consider a riskier industry than what you are actually in, making it more difficult to qualify for a small business loan or other type of business financing. Regularly reviewing your profile to ensure that everything is accurate is important. All of the bureaus have processes for correcting verifiable errors.
  • Establish business credit accounts: I’ve often heard the complaint from business owners, “It takes credit to get credit and I can’t get any credit.” While it may be true that it’s difficult for a new business to walk into the bank and get a small business loan, there are other ways to establish a business credit profile.
  • Establishing business trade accounts with your suppliers is often available simply for the asking. If they report your good credit history to the business credit bureaus, these 30-, 60-, or 90-day credit accounts will help you build a robust business credit profile.
  • Business credit cards are another great way to build your profile. Because most credit card providers lean heavily on your personal credit score, it’s often easier for a business owner with a good to excellent personal credit history to qualify for a business credit card. And, if they report to the business credit bureaus (some don’t, so it’s worth asking), they will also help you build your business credit.
  • Make timely periodic payments: In the same way making timely payments on your mortgage and auto loan helps you build a good personal credit score, making each and every payment on time will help you establish a strong business credit history. This applies to your business lease (if you have one) and any utility bills that are in the business’ name.

Your business credit profile is public

Unlike your personal credit score, your business profile is publicly available to anyone who may be interested and willing to pay for the privilege of reviewing your business credit history. This could include any potential creditors as well as competitors or other interested parties.

What’s more, it’s possible for two businesses with similar names and similar addresses to sometimes be confused. For example, Joe’s Bar and Diner could easily be confused with Joe’s Restaurant, if they are in the same area with similar-looking addresses. The same level of data validation that goes into updating your personal score isn’t part of the process for business scores—making it even more important to make sure your profile is accurate.

This is one reason why I am a fan of data validation within the small business loan process. It gives them the opportunity to confirm that you are who you say you are and will make the application process easier for you.

A strong credit profile is a valuable asset

Even the smallest startup can benefit from establishing a business credit profile—particularly if you plan on growing your business. The sooner you start to build your business credit history, the better for you and your business.



4 Ways to Work on Strengthening Your Business Credit in 2022

You have big goals for your startup in 2022. Growth, higher profits and a better online presence might be at the top of your list. However, if building your business credit isn’t part of your plan, you may be overlooking an important milestone.

Your business’ credit can play a significant role in the long-term success of your company. If you’ve ignored this fact for a while, you’re not alone. Entrepreneurs are notoriously busy. Building positive business credit is one of those tasks that tend to get put off for later.

Yet for the sake of your business, and even for the sake of protecting your personal credit, it’s time to stop procrastinating. Here are four smart tips to help you work on your business credit in 2022.

Four ways to work on your business credit

Dot your I’s and cross your T’s

Before you begin checking your commercial credit reports or trying to establish credit in your company’s name, it’s a good idea to make sure that your business is set up correctly. In addition to profits and cash flow, a properly set up business is a crucial part of becoming credible in the eyes of lenders, vendors and service providers.

If your business has been up and running for a while, you’ve probably already completed some of these key initial steps. For the rest, consider making yourself a to-do list.

You might aim to complete at least one of the following tasks each week:

  • Incorporate or form an LLC with your state
  • Apply for an Employer Identification Number (EIN) from the IRS
  • Open a business bank account in the company’s complete legal name (as it was filed with the state and IRS). Use the account regularly to pay bills
  • Set up a dedicated business phone line in your company’s name. Make sure the number is listed in the directory
  • Get a DUNS number

Once you’ve completed the initial steps above, keep going and consider adding a few additional tasks to your to-do list as well.

Check your commercial credit reports frequently

Just like your personal credit reports matter when you apply for a loan or credit card account, your commercial credit reports (Dun & Bradstreet, Experian, and Equifax) are likely to be considered when you apply for financing or services for your company.

For this reason, it’s a good idea to create the habit of checking your commercial credit reports often, preferably on a monthly basis. Credit reporting errors happen. When they do, those mistakes can potentially harm your commercial credit reports and scores.

It’s up to you to monitor your startup’s credit reports and make sure that the information contained there is accurate. If you discover incorrect information on your reports, you can and should take action.

Learn more about how to dispute credit reporting errors with the commercial credit bureaus here:

Establish vendor accounts and open a business credit card

Building strong business credit begins with establishing positive tradelines on your commercial credit reports. A few vendor accounts with net-30 terms can be a smart place to start if you do not already have established credit in your business’ name.

Remember, before you open an account you should ask the vendor whether they report to the commercial credit bureaus. You can also check out these three vendor accounts which could help you establish some credit for your company.

Another way to potentially build commercial credit is to open a business credit card in your company’s name. Keep in mind that, although you may be applying for credit in your company’s name, you’ll most likely be required to provide a personal guarantee to secure the new account.

Understand how commercial credit scores are calculated

Of course, simply opening a new vendor account or business credit card alone isn’t enough to build great business credit scores. You will need to manage your new accounts properly or they could backfire and hurt your business credit scores instead of helping them.

Each commercial credit bureau has its own method of credit reporting and scoring. As a result, there is no clear-cut answer to the question, “How are business credit scores calculated?”

Nonetheless, there is some key information which is typically important.

Here are some of the factors which are often considered when your business credit scores are calculated:

  • Payment history
  • Length of credit history
  • Outstanding debts
  • Public records
  • Credit utilization ratio
  • Industry risk

Strong business credit can be essential to the growth and long-term health of your business. It can give you an edge, which your competitors might lack. Make a concentrated effort to follow to steps above, and you could set your business up for more success in 2020 and the years to come.



Which Business Credit Scores Matter the Most?

Not all credit scores are created equally. You likely already know that you have a personal credit score; it’s what you need to buy a car, get a mortgage, credit card, or even pass a background check. You probably also already know that there are three bureaus (Experian, Equifax, TransUnion) that report your credit scores.

What you may not already know is that your small business has a business credit score. Just like your ability to pay your credit card bills and mortgage payments on time factors into your credit score, your ability to handle your business’s debt and accounts payable, among other factors, all go into your business credit score.

Just like personal credit scores, business credit scores come from multiple reporting bureaus (Dun & Bradstreet, Experian, Equifax), and can help you get better financing. And just like personal credit scores, business credit scores are not all created equally.

Here’s are the three credit scores that matter to business owners

Personal credit score

As you learn more about business credit and get more into the details of potentially building or growing your profile, be sure not to neglect your personal credit. In fact, if you’re just starting a business, you may have to lean more on your personal credit profile to get startup financing.

If you’re years into your business and your business credit score is less-than-stellar, some services may take your personal credit score into account. Taking care of your personal credit score can bail you out if you let your business credit fall apart.

By keeping things up on the personal credit side of things, you can have a great plan B for your business and stay on track for your personal goals. Your personal credit score is reported on a scale of 350 to 850, and you’re entitled to one free credit report a year for you to know what you can work on or fix in order to have a healthy profile.


The D&B PAYDEX Score is reported by Dun & Bradstreet. With a scale of 1 to 100 (100 being a perfect payment history), it’s a little simpler than personal credit to gauge where you’re at off the bat. While your social security number is associated with your personal credit and your EIN (or employer identification number) with your business credit, you also need a D-U-N-S number to access your D&B PAYDEX Score.

With the special sauce that Dun & Bradstreet uses, paying your bills on time (and especially early) is key and can work in your favor. If you only pay your bills on their due date, the highest rating you can get is 80, while 100-rated payments are those that are made 30 days early. If you want a credit score that takes into account your early payments, the PAYDEX score is one to keep an eye on.

FICO® LiquidCredit® Small Business Scoring Service℠

While the PAYDEX score is more concerned with how promptly you make your payments, your FICO® LiquidCredit® Small Business Scoring Service℠ (SBSS score) can help you get some more favorable financing.

While having any of your credit ratings high is always excellent, the SBA (Small Business Administration) requires a SBSS score to consider your business for an SBA loan. SBA loans can, depending on the amount, come without much required collateral and with more desirable rates and terms.

PAYDEX scores are rated on a scale of 1 to 100, and the SBSS score ranges from 0 to 300. Most lenders set their minimum score at 160, but the SBA reportedly sets their minimum at 140. By working to get your score above the minimum, you can open up your ability to get solid financing and grow your business.

Intelliscore PlusSM from Experian

Experian’s Intelliscore attempts to determine the likelihood of serious delinquency by your business over the next 12 months, all based off the business data available. Just like the PAYDEX score, it’s measured on a 1 to 100 scale, a score of 1 being the highest risk, 100 being the lowest.

The Intelliscore is determined by over 800 commercial and owner variables, including tradeline and collection information, recent credit inquiries, public filings, new account activity, key financial ratios and other performance indicators.

If you can come to your lender with a solid Intelliscore, you can potentially put their minds at ease and secure more favorable rates and terms than you would otherwise.

As you can see, not all business credit scores are created equal. Now that you know about the different business credit scores from various reporting bureaus, find the best business loan for your startup depending on your credit score.



7 Reasons Every Startup Needs a Business Credit Card

A business credit card is one of the most important financial tools in any startup’s toolbox. It’s way more than just a personal credit card that you use for business dealings—it’s a unique, flexible form of financing that also delivers rewards and perks specific to what’s important to you and your business.

If you’re starting a new business, don’t wait until you’re well-established to start using a business credit card. Get going right away, because as the following eight reasons will explain, the benefits of doing so are immediate, and will set you up for success down the line.

Separate business and personal spending

When you start your business, you’ll need to make purchases. You’ve already got a personal credit card—why not just put these expenses on there and rack up the points?

Because, for several reasons, you’ll want to separate your business and personal spending from the get-go.

Logistically, separate business expenses make it easier to track what you spend on your business (rather than every transaction getting mixed in with your charges for movie tickets and dog food, or whatever else you buy in your personal life). Come tax season, you (or your bookkeeper) will be thankful that you didn’t co-mingle every business and personal transaction onto a single account.

Protect your personal assets from legal liability

Additionally, there are legal implications to not separating your expenses. If your business is an LLC, partnership, S-Corp or C-Corp, you won’t enjoy any of the legal or liability protections to your personal assets if your finances aren’t actually divided. That means you could be personally liable for any lawsuits that call for damages against your business.

Help build business credit

While the above reasons may have already convinced you to get a business credit card, it’s true that you can also avoid headaches and protect your assets by opening up a business checking account. So what makes getting a business credit card, in particular, a good idea for startups?

For one, it helps build up your business credit score. A business credit score is an entirely different metric than a personal score, based on different factors—such as how responsibly you use a business credit card. By building up your business credit, you create more affordable financial possibilities for your business in the future, from negotiating with vendors to obtaining more affordable terms on a long-term business loan.

Some business credit card companies also report business activity to personal credit bureaus, which means you can improve your personal credit, as well. Conversely, you may also damage your personal credit if you aren’t careful.

Provide higher credit limits

Because credit card companies recognize that a business will probably spend more than an individual does, business credit cards typically have a higher spending limit than personal ones. That means you likely won’t have to max out several credit cards to make all of your business purchases—which is bad for your credit utilization ratio.

Speaking of your credit utilization ratio, a higher credit limit means a lower ratio, which also helps improve your overall credit score.

Provide a financial safety net in case of emergency

Startups constantly have to battle to balance their cash flow, as inconsistent revenue is coupled with unexpected purchases. Startup costs are so variable, you can’t always depend on a lump sum of savings to cover them.

Enter your business credit card, which can be used to cover surprise expenses, while giving you time to move funds around to pay them off by your next payment period. Only a business line of credit—which can be harder for startup businesses to qualify for—is as useful in a financial pinch.

Works as a source of low-cost financing

In many ways, a credit card is similar to more traditional forms of “business financing,” such as a business loan or line of credit. You are essentially borrowing money now in order to pay it back later, sometimes with interest.

Some credit cards, however, can essentially act as low-cost (or even free) financing, thanks to introductory periods with a 0 percent APR. Not every credit card offers this, but if you qualify for one, you essentially get a small loan with no interest payments for the life of the offer.

Extend lucrative rewards and perks

A business credit card, similar to a personal credit card, also offers users a number of rewards and perks that can either offset some of the cost of your purchases, or make running a business more enjoyable thanks to upgrades and benefits.

Every business credit card is different, but many give you points or cash back on most purchases. Some will either specialize in certain categories (i.e. airfare, office supplies, social media) that give you point multipliers, while others allow you to pick and choose which categories give you the most points back (and thus the most bang for your buck).

Business credit cards can also provide cell phone insurance, car rental and travel insurance, subscriptions and discounts on business tools like G Suite and Salesforce, and other travel perks like airport lounge access and seat upgrades.

Essentially, every time you make a purchase with a business credit card, your business gets a little discount, and that discount may turn into a sizeable one if you use it effectively.

Key takeaways

As an entrepreneur, your financial options are limited. You might have your personal savings, some investment from your inner circle, or perhaps a small business startup loan. Owning a business credit card gives you another layer of financial flexibility, while simultaneously building up your financial resume and acumen for the future. Couple all this with some valuable rewards and perks, and it’s easy to see why every startup needs a business credit card.