How To Build Business Credit

Young Couple Reviews Their Credit Score Looking At Laptop
09 Sep 2022

Starting a small business is hard enough - but building up your credit can be an even bigger challenge. Unless you know where to go and what to do, it can be difficult to get the financing you need to grow your business. In this blog post, we will discuss ways that you can grow your small business credit. We will also provide tips on how long it takes to build business credit and how to build it fast!

Why is it important to establish business credit?

Firstly, it can help you get approved for loans and lines of credit. Lenders will often check your business credit report when considering you for financing, so a strong credit history can give you a leg up.

Second, business credit can help you get better terms on financing. A good credit score can lead to lower interest rates and better repayment terms.

Third, business credit can help you build goodwill with suppliers. Establishing a good payment history can make it easier to negotiate payment terms and get discounts in the future.

Finally, having a solid business credit score should hopefully give you peace of mind. Knowing that your business has a solid credit foundation and good financial health means you can relax and focus your attention elsewhere.

Does your personal credit score matter for your business?

While your personal credit score does not have a direct impact on your business, it is still important for a number of reasons. If you are looking for funding from investors or lenders, your personal credit score is one of the main indicators they will use to assess your financial stability and whether you're likely to repay a loan on time. A low personal credit score could lead to your business being denied financing altogether.

This also applies to applying for business insurance, your personal credit score may be used to determine your premium. Finally, landlords or suppliers may also use your personal credit score to decide whether or not to do business with you. While your personal credit score is not a direct factor in your business, it can still have an indirect impact on your success. Paying your bills on time, maintaining a healthy credit mix, and keeping your balances low are all key ways to keep your personal credit score strong.

Steps to build your business credit fast

Now we've established why your business credit is important, let's take a look at a few steps you can take to jumpstart building it.

File the right taxes

At the end of every financial year all companies, whether you’re a small sole trader or a medium limited company, must file their accounts, Company Tax Return or Corporation Tax with HM Revenue and Customs (HMRC). These accounts also need to be filed with Companies House.

It’s important to file the accounts fully rather than submitting abbreviated or micro entity accounts. Though it might extend the process, filing the full accounts on time and in line with guidelines can lead to a better business credit rating in the long run.

One way to build small business credit is to make sure that you file your accounts on time and in full. In addition, filing your accounts in full provides HMRC with a more accurate picture of your financial situation, which can help to ensure that you pay the correct amount of tax. Ultimately, taking the time to file your accounts correctly can help to improve your business credit rating and pave the way for a more successful future.

Avoid using personal lines of credit

This can be difficult, especially if you are just starting out, but it is important to remember that your business credit and your personal credit are two separate things. Using personal lines of credit can actually hurt your business credit, so it is best to avoid it if at all possible. Instead, try to use business credit products and services that are specifically designed for businesses. This will help you build up your business credit without putting your personal credit at risk. 

Open credit accounts with partners and suppliers

Trade credit is a type of financing that allows businesses to purchase goods or services now and pay for them later. This can be an attractive option for businesses that need to buy inventory or materials but may not have the cash on hand to do so. In the UK, trade credit is typically offered by suppliers on terms of 30 days, although longer terms may be available. There are a few things to keep in mind when considering trade credit, including the possibility of interest charges and late payment fees. But if used wisely, trade credit can be a helpful tool for businesses of all sizes.

This can be useful because suppliers are generally more willing to report payment information to the business credit agencies than other types of creditors. As well as this, by establishing a history of on-time payments with suppliers, businesses can demonstrate their commitment to financial responsibility, which can lead to improved terms and conditions with future creditors. Finally, paying for goods and services with credit can help your business to take advantage of early payment discounts, which can further improve cash flow.

Dispute errors in your credit file

These files are used by potential lenders to help them make decisions about whether or not to give you credit. If there are errors on your file, it could prevent you from getting the credit you need. Fortunately, there are steps you can take to dispute any errors that you find.

The first step is to contact the organisation that provided the information. This could be the lender, the credit reference agency, or both. You will then need to provide evidence that the information is incorrect. Once you have done this, the organisation will investigate and make any necessary corrections. If you follow these steps, you can dispute any errors in your credit file and ensure that your file is accurate.

Get a business credit card

One of the simplest and most practical ways to build your business credit score is with a business credit card.

A business credit card works well to build business credit because it allows you to spread payments over a period of time. Alternatively, business credit card users can make small purchases and pay them off immediately. By using a business credit card to make purchases and pay bills, you can better track your expenses and ensure that you have enough money. This helps build your credit score from the ground up.

Running a business credit card helps you control business spending and stay on top of your finances – while building a healthy credit rating that makes your financing even more effective in the future.

The Capital on Tap Business Credit Card, offers credit limits up to £150,000 and unlimited free 1% cashback on every purchase. That means while your purchases are helping you build business credit, they are also racking up more money you can put back into growing your business.

Limit credit applications

Every time you apply for a new line of credit, businesses will pull your credit report and score. This is called a hard inquiry, and it can have a negative impact on your score. Furthermore, each time you are rejected for a new line of credit, it also has a negative impact on your score. Therefore, it is best to only apply for new lines of credit when you are confident that you will be approved. By limiting the number of credit applications you make, you can help to ensure that your business credit remains healthy.

If you decide to apply for a Capital on Tap Business Credit Card you can relax knowing that they only do a soft inquiry. This doesn’t have any impact on your credit report.

Borrow from lenders that report to credit bureaus

When you're looking to borrow money for your business, it's important to consider lenders that report to credit bureaus. By borrowing from these lenders and making timely repayments, you can help improve your business credit score. However, it's important to note that late or missed payments will also be reported to the credit bureau, so it's still important to ensure that you make your repayments on time. Some of the most popular lenders who report to credit bureaus in the UK include Experian, Equifax and Callcredit.

Avoid County Court Judgments (CCJs)

A county court judgment (CCJ) is a court order that says you owe money to someone. This could be a result of not paying back a loan, an outstanding debt, or even something as simple as unpaid Council Tax. If you have a CCJ against your name, it will stay on your credit file for six years and will make it harder to get accepted for credit in the future. In addition, your creditors may take further action to recover the debt, including enforcement agents and charging orders. A county court judgment can therefore have a significant impact on your business's financial health, so it’s important to try and avoid them if at all possible.

Monitor your business credit reports

By checking your reports regularly, you can catch any errors or red flags that could hurt your chances of getting approved for financing. And if you do spot something that needs to be fixed, you can take action to improve your score. So don't wait - monitoring your business credit reports is an essential part of being a responsible business owner.

How long does it take to build business credit?

There's no one answer to the question of how long it takes to build business credit in the UK, it can range from several months to a year.

The length of time will depend on the factors discussed above, including the type of business you have and your payment history.

What about companies that help build business credit?

There are a number of companies that help build business credit. These companies work with businesses to help them establish credit lines with banks and other financial institutions. This can be a valuable service for businesses that may have difficulty establishing credit on their own. By helping businesses to build their credit, these companies can improve their chances of success. In addition, these services can also help businesses to save money on interest charges and fees.

Frequently Asked Questions


How can I build business credit with bad personal credit?

There are a few ways to build business credit in the UK, even if you have bad personal credit. One option is to apply for a business credit card. You can also ask suppliers and vendors to report your payments to the major business credit reporting agencies. Another way to build business credit is to take out a small business loan from a lender that reports to the business credit agencies. Finally, you can sign up for a business credit monitoring service, which will help you track your progress and ensure that positive information is being reported about your company. By following these steps, you can slowly but surely build up your business credit profile, despite having bad personal credit.

What is the easiest way to build business credit?

The easiest way to build business credit is to not limit yourself to one tactic. Follow all of the best practices outlined in this article so that if one method doesn’t work well for you, you have other options to fall back on.

How can I establish business credit for the first time?

The most impactful way to build business credit for the first time is to open a business credit card, funnel all of your business purchases through it, and pay on time.

Should I apply for a business credit card to build my business credit?

The Capital on Tap Business Credit Card offers credit limits up to £150,000 and uncapped free 1% cashback on top of unlimited cards for your employees and no annual fees.

Apply today to grow your business while earning lucrative rewards and building business credit.

Written by: Holly Woodward
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