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Business Credit Basics

By Justin Pritchard. Banking/Loans Expert

Justin Pritchard helps consumers navigate the world of banking.

Business credit is similar to personal credit. It is a way for others to determine how likely you are to pay loans and bills. While personal credit is important for small businesses, you should try to establish business credit as well.

Business Credit Basics

  • What is Credit?

The idea behind business credit is that lenders. suppliers, and partners don’t know whether or not you’re likely to pay them.

Looking at your business credit helps them decide if they should take a risk on you. With strong business credit, you borrow at lower costs, and you may get more favorable terms from suppliers. You may also be able to get loans without a personal guarantee.

Why Business Credit?

You can already get loans with your personal credit, so why bother with business credit? It’s best to keep business and personal matters separate for a variety of reasons. If things go sour with personal finances, your business may suffer (and it works the other way around too).

In addition, business borrowers are different from personal borrowers, so business credit is scored differently. For more details, see:

Establishing Business Credit

Just like personal credit, you have to build business credit. The steps are similar: borrow money, repay responsibly, and make sure your payments are reported to business credit reporting companies. You may also want to supply information to these companies to enhance your business credit report.

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