How To Build Business Credit

Starting a small business is hard enough - but building up your credit can be an even bigger challenge. 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?

• Financing approval: A strong business credit history can improve your chances of getting approved for loans and other credit. Lenders will often review your business credit report to assess your creditworthiness. 
• Better financing terms: A good business credit score can lead to lower interest rates and more favourable repayment terms, saving you money in the long run. 
• Supplier relationships: Having a solid business credit history can help you negotiate better payment terms and discounts with suppliers, improving your cash flow and operational efficiency. 
• Peace of mind: Knowing your business has a solid credit foundation can give you peace of mind, allowing you to focus on other aspects of running your business.
  
  

Quick tips to improve your business credit score

Now you know why it’s important to have a good business credit score, how can you get there? Here are some tips to consider:

• Register your business: Make sure your company is registered with Companies House and has any licences and permits it might need.
• Open a business bank account: Don't mix personal and business money. Open a dedicated account just for your business transactions.
• Get a business credit file: Contact credit reference agencies like Experian, Equifax and Creditsafe to start a credit file for your business.
• Apply for a business credit card: Apply for a business credit card and use it responsibly. Good behaviour gets reported and builds your credit.
• Open trade accounts: Work with suppliers who will let you pay later. Making those payments on time helps your credit profile. 
• Check your reports regularly: Review your business credit reports often. Fix any errors right away so they don't hurt your credit.

It takes time to build great business credit, but using credit responsibly month after month is the key. Good credit can mean better financing, better supplier terms, and looking good to big clients.

Does your personal credit score matter for your business?

While your personal credit score doesn't directly affect your business credit, it can influence your business's financial opportunities. Lenders, investors, and even suppliers may review your personal credit score to gauge your financial stability. A low personal credit score could hinder your business's ability to secure financing or favourable terms. Maintain a strong personal credit score by paying bills on time, managing debt, and keeping balances low to support your business's financial health.

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: Ensure you file your business accounts and taxes on time and in full. Accurate and timely filing can positively impact your business credit rating.
• Avoid using personal lines of credit: Use business-specific credit products and services to build business credit without affecting your personal credit.
• Open credit accounts with suppliers: Trade credit allows you to buy now and pay later, helping you establish a payment history that boosts your business credit.
• Dispute errors in your credit file: Regularly check your credit reports and dispute any inaccuracies to ensure your credit history is correctly represented.
• Get a business credit card: Use a business credit card for expenses and pay the balance on time to build your credit score.
  The Capital on Tap Business Credit Card offers credit limits up to £250,000 and 1% cashback on every purchase, helping you build business credit while earning rewards.
• Limit credit applications: Avoid multiple credit applications, as each hard search can negatively impact your credit score. Apply only when necessary and be confident in your approval chances.
• Borrow from lenders that report to credit bureaus: Ensure your lenders report to credit bureaus to reflect your positive payment history on your credit report.
• Avoid County Court Judgments (CCJs): Prevent CCJs by managing debts responsibly. A CCJ can stay on your credit file for six years and severely impact your creditworthiness.
• Monitor your business credit reports: Regularly review your credit reports to identify and correct any discrepancies, ensuring your credit score accurately reflects your financial behaviour.
  
  

How long does it take to build business credit?

Building business credit can take several months to a year, depending on the type of business you have and your financial practices. There is no set time and it 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?

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?

Even with bad personal credit, you can build business credit by applying for a business credit card, asking suppliers to report payments, taking out small business loans from lenders that report to credit bureaus, and using a business credit monitoring service.

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 £250,000 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.

How do I get business credit for a new business?

For new businesses, obtaining business credit involves starting with a business credit card, applying for small credit lines with suppliers, and building a positive payment history. Ensure your business is registered and has a dedicated business bank account. Establishing a solid credit history early can help secure more substantial credit in the future.

What is the best way to build credit for a business?

Building credit for a business involves several key steps: open a business bank account, obtain and use a business credit card responsibly, establish trade credit with suppliers, and ensure timely payments on all accounts. Regularly check your business credit reports for accuracy and address any errors straightaway. 

How can I get business credit with no credit history?

If your business has no credit history, start by registering your business and applying for a business credit card or a credit line with suppliers who report to credit bureaus. Make small purchases and pay off balances on time to build a positive credit history.

What should I do if I find errors in my business credit history?

If you find errors in your business credit history, contact the credit reporting agency and provide evidence of the inaccuracies. The agency will investigate and make corrections as needed.