Business Credit 101

Many business owners may not realize that they can have business credit for their place of work. This is an important tool to know about, however, since using personal credit for your business may come with certain risks. Continue reading to learn more about what factors play into your businesses credit score, and how having a strong score can benefit you and your business.


The use of personal credit for a business can have a couple drawbacks. First, if something were to happen, the person whose credit was used would be completely liable. Second, many lenders look at a business’s credit over personal credit when considering if they want to grant a business a loan. These are both good reasons to look at utilizing business credit for your company instead.


When you have good credit your business has a better chance of getting any financing you may need, whether it’s an emergency expense or because you would like to take advantage of a good growth opportunity. This type of credit can also be transferred, meaning that if you sell or give your company to a new party, then the business can maintain its good credit history rather than starting from scratch.


Having strong business credit is usually determined by three things; a business’s public record, their demographic information, and their credit history. Public record usually includes any bankruptcies, liens or judgments a company may have. Your demographic is made up of your business SIC, how long the company has been in business and its size. A combination of these factors will play into the credit score.


The length of time something will appear on the credit report depends on what type of item it is. Bankruptcy will show for nine years or longer. Liens and judgments show for six years and nine months. Transactions and trade data will report for three years. It’s the transactions and trade data that can play a role in helping you build a company’s credit. For example regular payments on time over a lengthy period can help increase your score.


When you understand business credit and how it works you can begin to use it to help your business. Continuing to use personal credit can carry some risks while having credit for your business can help your company get financing when needed. Understanding your report, what factors into it, and how to build your score may also be beneficial. For any questions you may want to consult with a professional.

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