More than 30 million small businesses operate in the United States currently, and thousands of business owners and entrepreneurs make the leap into setting up their own shop each year. Having a small business comes with several opportunities, including the ability to control your time, your earning potential, and your lifestyle. However, with these new opportunities come a slew of challenges. One of the most common obstacles in owning a small business is managing your finances and navigating the world of business credit.

Similar to personal credit, business credit is a gauge of how financially responsible a business is over time. Payment details, debts owed, and negative marks like judgments or bankruptcies all work together to dictate a business credit score and report. Most business owners think that their personal credit translates to the business, but that isn’t always the case. Companies of any size need to be diligent about their business credit just as individual consumers are with their personal credit standing.

The need for strong business impacts the ability of a business owner to obtain financing when it is needed. Importantly, access to cash is often a reason for many business failures. Business credit is important because it offers access to loans and business credit cards. A business credit card is often the easiest type of financing to obtain, but it still requires business owners to pay close attention to their financial standing and business credit report and score.

How to Build Good Business Credit
Not unlike personal credit, it takes work and due diligence to build business credit. You can start with establishing strong habits when it comes to making payments on outstanding business debts, taking on only debt or credit you need, and avoiding negative marks on your business credit like late or missed payments or bankruptcy. These financial habits will help you build and sustain strong business credit for new and old businesses alike.

If you are new to business ownership, the best step you can take to build your business credit is to register your business with the business credit bureaus. This requires having a legal business structure in place, and having standard information about your business readily available, such as the address and phone number. Once that is established, work with business creditors and lenders who report to these credit bureaus about your payment history and financial activity.

Older businesses with less than perfect business credit need to focus more on creating the financial habits that present a strong front to the business credit bureaus. Only using credit when it is needed, keeping utilization rates low on current credit accounts, and ensuring creditors report to the credit bureaus on your behalf are all sound strategies for rebuilding business credit over time. Taking these steps to ensure your business credit is in good shape will allow you to get access to new credit easily.

Applying for a Business Credit Card
Applying for a business credit card is not all that different from applying for a personal credit card. For instance, you find a business credit card issuer that offers the type of account, rewards, or other features you want, and you apply. In most cases, an application can be completed online or over the phone in a matter of minutes.

However, the information you provide in the application process is slightly different. Most credit card companies that offer business credit cards will require some or all of the following:

  • Business name and address
  • Type of industry the business operates in
  • Annual revenue of the business
  • Typical business cash flow
  • Other debts owed

Once the credit card issuer has reviewed these details of the business, you will receive a response about your approval or decline. The stronger your business credit, the more likely you are to get approved for a new business credit card. This is because your business credit score is likely to play a factor in determining if you are a good candidate for a new credit line. Credit card issuers want to know that you are an acceptable risk, and your business credit score gives them some inclination.

If you are an established business, the process of applying for a business credit card may be relatively easy, especially if your business credit is strong. However, a newer business may not have business credit and therefore, credit card issuers rely on personal credit to get approval. When this is the case, credit card companies take a look at the same factors, such as payment history, total debts owed, and utilization of current credit lines to approve or deny a new applicant.

The Bottom Line

Getting access to financing is a must for small businesses at some point in their lifecycle. Business credit cards can be a flexible solution to temporary cash flow issues, covering working capital, or paying for larger expenses when revenue is light. However, only businesses with strong business credit, or good personal credit, are eligible for a business credit card. It is necessary to review your business and personal credit before applying for a business credit card to ensure you are a good candidate for the credit card company.


By Andrew from LendEDU – a consumer education website and personal finance resource.