What is Business Credit

Do you know you have the opportunity to acquire, build, and maintain business credit? This means that you don’t have to rely on your personal credit to seek funds because there’s a different line of credit available for your enterprise.

We can share with you all about knowing business credit and the reasons why you need to have one.

Business credit is used to gauge the ability of your business to secure loan money. It can also be used to measure your company’s ability to obtain services or goods based on a later promise to pay. You do not personally guarantee these cash, services, or goods against your personal property. Instead, it will be guaranteed against your business’ assets.

Advantages of Business Credit

It is important to establish your own business credit report as a separate entity from your business. Having a line of credit is like having a ready resource in case you need some money to run or even expand your business. Here are some advantages of a business credit:

  • Lower interest rates compared to credit cards.
  • Improved cash flow management to help you even out your cash flow when there are industry-specific, seasonal, or predictable fluctuations.
  • Used as emergency funds.
  • Perfect for purchases that are too high to put into a credit card but too small to apply for a loan.
  • Ability to repay and then borrow again as needed.

Remember that every business needs various types of credits at some point. To establish a good business credit and score, manage your debt to avoid missed payments on your loans and prepare detailed financial statements. Most important, comply with all requirements of the business credit market to ensure likelihood of getting approved.

Obtaining Business Credit

Lenders typically grant business credit lines to those with a proven track record. These credit lines may either be secured or unsecured and the lender would typically require you to pay a small amount for administration costs. It’s necessary to complete several business applications with a creditor or individual vendor. Each organization normally has its own guidelines and application process for granting credit – some companies are less strict, but some have stringent standards.

Generally, a lender will issue a business credit similar to a personal loan. They will gather information about your trade credit transactions from business credit bureaus in order to create your credit report. Your business name and address will be used as well as your FIN (federal tax identification number), which you can get from the IRS. These business credit bureaus will compile the data to generate your business credit report. Most of the time, those who want to issue credit to your business will rely on this report to determine if you’re eligible for their credit and how much they can give you.


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