What is Business Credit and why is it important?

Learn why lenders, investors and suppliers often consider a business's credit score when making decisions about whether to approve loans, extend credit.

Building and maintaining good credit is crucial for any business looking to succeed. Yet, according to recent studies, only about half of all businesses have good credit scores. Meanwhile, many young entrepreneurs are facing challenges with their personal credit scores, which can impact their ability to secure business loans and funding. In this blog, we'll explore the definition and importance of business credit, the role of credit repair companies, and what business owners need to know to stay ahead of the game.

What is business credit?

Business credit, also known as commercial credit, is a type of credit extended to businesses, rather than individuals. Business credit is used to help companies purchase goods and services, finance expansion, or cover day-to-day expenses.

Business credit is established when a company establishes credit accounts with vendors, suppliers, and other businesses. These accounts are typically reported to business credit bureaus, which track the company's payment history and other credit-related information. This information is used to create a business credit score, which is similar to a personal credit score.

Business credit is important because it allows a company to build a credit history independent of its owners or shareholders. This can be beneficial for a company in a number of ways. For example, having good business credit can make it easier to obtain financing, secure loans, and attract investors. It can also make it easier for a company to negotiate better terms with suppliers and vendors.

Business credit can also be separated from personal credit. This means that even if a business owner has poor personal credit, their business can still have good credit, making it easier for them to obtain financing for their business.

Overall, business credit is a measure of a company's creditworthiness and its ability to repay its debts, and it can play a key role in a company's ability to grow and succeed.

How can I obtain commercial credit?

Obtaining commercial credit, also known as business credit, can be a process that involves several steps. Here are a few steps that can help you establish commercial credit for your business:

  1. Establish your business: To obtain commercial credit, you must first establish your business. This means registering your business with the appropriate state or local government agencies and obtaining any necessary licenses and permits.
  2. Get a Federal Tax ID number: Obtain an EIN (Employer Identification Number) from the IRS. This number is used to identify your business for tax purposes and it is required to open a business bank account.
  3. Get a D&B number:  Dun & Bradstreet (D&B) number, also known as a D-U-N-S number, is a unique nine-digit identification number that is assigned to your business by the Dun & Bradstreet credit reporting agency, which provides lenders and suppliers with access to your business's credit history and payment record.
  4. Open a business bank account: Separating personal and business finances is critical for building good credit. This will help establish a financial history for your business and it's important to have a business account to show that your business is a separate entity from your personal finances.
  5. Establish trade lines: Establish trade lines with vendors and suppliers. This means opening credit accounts with companies that you regularly do business with, such as suppliers of office equipment or inventory. Be sure to pay your bills on time, as timely payments will be reported to credit bureaus and will help build your business credit.
  6. Get a business credit card: Apply for a business credit card. This will help to establish a credit history for your business and can also be used to make purchases and manage cash flow.
  7. Monitor your credit: Check your credit reports from the major business credit reporting agencies (Dun & Bradstreet, Experian and Equifax) regularly to ensure that the information is accurate and up-to-date.
  8. Seek professional advice: If you need help, consider seeking the advice of a business credit consultant or a financial advisor to guide you through the process.

Connect with a USBA Business Advisor to learn how you can get your business registered and take steps to build your personal or business credit.


How do credit repair companies help?

Credit repair companies can help business owners by working to improve their credit score. They do this by identifying and disputing any errors or inaccuracies on credit reports, negotiating with creditors to remove negative items, and providing guidance on credit-building strategies.

The credit repair company will typically begin by reviewing a business owner's credit reports from the three major credit bureaus (TransUnion, Experian, and Equifax). They will look for any errors or inaccuracies that might be hurting the business's credit score. Once they identify these items, they will dispute them with the credit bureaus, and can negotiate on your behalf to minimize payoff amounts.

Additionally, credit repair companies can provide financial education and guidance to business owners, such as how to manage credit, create a budget and avoid common financial mistakes. They can also provide financial advice on how to maintain good credit moving forward.

Overall, credit repair companies can be valuable resources for business owners looking to improve their credit score. By joining the USBA as a gold or platinum member, you gain access to credit repair services, which can help business owners take steps to improve their credit score, making it more likely that they'll be able to obtain financing and secure loans with favorable terms.


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