Many small business owners don’t know that business credit exists—or if they do know about it, they don’t understand why it matters. Overlooking it can mean losing out on valuable opportunities for financing, contracts, and business growth.
For National Small Business Week, Nav and Startup Nation hosted a webinar for business owners where I laid out a roadmap for building and leveraging business credit.
Here are key takeaways from that event. You can watch the entire recorded webinar here:
Why Business Credit Matters More Than You Think
Business credit isn’t just about getting loans. It impacts multiple aspects of your business operations:
Insurance Coverage: Insurance companies may check business credit when evaluating applications for business insurance. One business owner discovered his insurance was denied due to incorrect information on his business credit report that was mixed up with another company. He fixed it and went on to get the insurance he needed.
Contract Opportunities: Government contracts and large commercial clients may require bonding or special insurance or both—and that may involve a business credit check. Or the commercial client may check credit to help understand whether the business has the capacity to take on the contract.
Financing Options: Whether you’re seeking SBA loans, equipment financing, or supplier credit, the application process may require a strong business credit history or good business credit scores.
Understanding the Business Credit Landscape
Business credit operates differently from personal credit in several key ways:
The Major Players
The three primary business credit bureaus are:
- Experian Business
- Dun & Bradstreet
- Equifax Business
In addition, the Small Business Financial Exchange (SBFE) aggregates payment data from major lenders and makes it available through commercial credit bureaus.
Key Differences from Personal Credit
- Anonymous reporting: Business credit reports typically don’t list company names, only account types (such as utilities, credit cards, etc.)
- Daily tracking: Business credit uses “days beyond terms” to report payment history. This is different from personal credit, where payment history often falls into 30-day buckets.
- Varying Score Ranges: Each bureau uses different scoring models with different ranges, so a good score varies by bureau. See the most popular business credit score ranges here.
Building Your Business Credit Foundation
Step 1: Establish a business entity
While you can build business credit as a sole proprietorship, forming an LLC or corporation offers significant advantages:
- Legal separation between personal and business finances
- Easier transition when building credit history
- Better protection for your personal assets
Step 2: Make your business “legit”
Creditors need to see that your business is legitimate and stable:
- Get a physical address: You can use your home address if it makes sense for your business, but you’ll likely want another address to use as a mailing address on websites and other public sources.
- Secure a business phone number: Maintain professional communication channels. Check out Verizon’s plans for small business[1] .
- Create a business email and website: Establish a digital presence with your own domain.
- Obtain an EIN: This free tax ID number helps match credit history to your business.
Get Nav’s free Checklist to Make Your Business Legit
Step 3: Know your industry
Industry codes (SIC or NAICS codes) affect your financing opportunities. Choose the code that best represents your main source of income. The Census Bureau offers free tools to help your business understand its NAICS codes.
Step 4: Build credit with trade lines
Trade lines are the foundation of business credit. These are accounts that report your payment history to credit bureaus:
Start with supplier credit: Many suppliers offer net-30 accounts where you can purchase now and pay within 30 days. When you pay on time, they report this positive payment history.
Check out Nav Prime: Get your business credit reports and business credit scores, along with personal credit data, updated monthly. Nav Prime submits your monthly payments as a trade line to the major business credit bureaus.
Use business credit cards: Most small business credit cards report to at least one business credit bureau and can help establish your credit history quickly.
Best Practices for Credit Building
Pay on time, every time
Business credit is incredibly sensitive to payment timing. Being even a day or two late can negatively impact your credit. Set up automatic payments or alerts to avoid missing due dates.
Strategic payment timing
Don’t pay accounts too early. If you pay a net-30 account in 3 days, for example, it may only show as “current” rather than demonstrating active use. You may want to consider paying after the company reports accounts to credit bureaus to demonstrate activity. (Check with the supplier or card issuer to find out when they report.) But always pay by the due date.
Monitor and correct errors
Prior research has found that some 20-25% of business owners find material errors on their credit reports. Check your credit regularly with all three bureaus and dispute any inaccuracies promptly.
Watch for UCC liens
These are public notices that a lender has a security interest in your business property. Lenders don’t always file releases when loans are repaid, so monitor your reports for outdated liens.
The Personal Credit Connection
While building business credit, don’t neglect personal credit:
- Many business credit applications still require personal credit checks
- Certain loans (like SBA loans) always check personal credit
- The FICO SBSS score combines personal and business credit data for some lending decisions
Important tip: Keep an eye on credit utilization for both personal and business credit cards to maximize your scores.
Why Business Credit Cards Matter
Business credit cards are often the most accessible form of credit for new businesses:
- Often available to very new businesses
- Usually check personal credit and income from all sources
- Some offer 0% introductory APR periods of 7-18 months
- Provide strong fraud protection
These benefits make business credit cards a solid choice when used carefully. Watch out though. Debt can quickly become overwhelming if you’re not careful.
Taking Action
Building business credit takes time and consistent effort, but the rewards can be worth it. Start by:
- Establishing your business foundation and infrastructure
- Applying for your first trade lines or business credit card
- Making on-time payments consistently
- Monitoring your credit reports regularly
Remember: the sooner you start building business credit, the more it will benefit you over time. Don’t wait until you need financing—start building your credit foundation today.
Additional Resources
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Nav offers tools and resources to help your small business build, manage and monitor its small business credit profile, as well as build a financially healthy company.
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