Nearly one-third of small businesses were not able to receive the funding they needed, according to the NSBA. As personal finances are hit by the recession, building your business’ credit score is essential for the long-term financial health of your company. Wondering why your company should prioritize building credit? Here’s everything you need to know about building credit as a small business.
Why Do I Need to Build Business Credit?
Many smaller companies rely on checking accounts to handle their day-to-day expenses. Or, if they use credit, they rely on their personal credit score to guarantee the credit line. a new report from the National Small Business Administration (NSBA) shows that 27% of businesses surveyed could not receive the funding they needed to grow. Another study shows that 0% of small business loans are denied due to business credit.
Because of the necessity of credit for companies, many owners turn to personal credit cards to help finance business needs. The same study shows that 46% of all small businesses use personal credit cards. With so many struggling to access business loans, building credit via business credit cards is essential.
Here are some of the best reasons to consider a business credit card:
| Keep personal and company finances separate | Track business expenses | Take advantage of business-centric perks not available with personal cards |
| Access more spending power | Establish and build up business credit | Provide employees with a way to pay for business expenses |
“As the owner of your business, your personal credit is on the line even when it comes to business credit cards and loans,” Solomon Lax, CEO of Revenued. “We suggest building up your personal credit score before taking out a business credit card. If you can’t wait, there are options, like Revenued, for people with bad personal credit.”
How Does Business Credit Differ from Personal Credit?
When companies don’t have a credit history, they often rely on personal guarantees from the owner, which is subject to a hard inquiry on your credit report. Solomon Lax, CEO of Revenued, is sounding the alarm about companies needing to build credit and not just rely on personal credit scores for business finances.
“Credit bureaus and lenders will often review personal credit before business credit, and if your personal credit is bad, this may be enough for them to not want to work with your business at all,” he said in a recent interview.
The most obvious difference between personal and business credit is a reliance on different scoring models. Personal credit scores are a byproduct of the credit reports compiled by three main credit agencies – Experian, Equifax, and TransUnion.
Business credit scores, however, rely on different models. The three main business credit bureaus are Dun & Bradstreet, Equifax, and Experian, as seen below:
| Dun & Bradstreet Business Credit Scores | Equifax Business Credit Scores | Experian Business Credit Scores |
| Paydex score (1 to 100) | Payment index (0 to 100) | Business credit score (1 to 100) |
| Scores of 80 or higher are considered low risk, scores of 50 to 79 indicate moderate risk, and lower scores equal high risk of late payment. | Reflects past payment history. A higher score is better, with 90 or higher indicating bills paid on time. | The higher the score, the lower the risk of serious payment delinquencies. |
| Failure score (1,001 to 1,875) | Credit risk score (101 to 992) | Financial stability risk rating (1 to 5) |
| A lower score translates to a higher risk for bankruptcy or business closure within 12 months. | Assesses the likelihood of your business becoming severely delinquent on payments. A higher score translates to a lower risk. | A lower score is better because it represents a lower risk for default or bankruptcy in the next 12 months. |
| Delinquency score (1 to 5) | Business failure score (1,000 to 1,880) | |
| A lower score is better because it equals lower risk for seriously late payment (91-plus days) or bankruptcy. | Measures the likelihood of your business closing within a 12-month period. A lower score equals a higher probability of business failure. |
How Can I Build Business Credit?
If you are relying on your personal credit score for your company’s business credit loans, establishing business credit can seem daunting. Fortunately, building credit for your company is straightforward. Here are some top tips for establishing – and building – good business credit:
| ① Don't treat business credit like free money | Credit cards can seem like free money, especially when those purchases aren't automatically deducted from your company's bank account immediately. Because credit cards can seem like "invisible money" you should always treat credit lines as you would you own physical funds. Only spend what you can afford to pay off either right away, or easily with a strict payment plan. |
| ② Make more than just the minimum payment | Making the minimum monthly payment due on your credit card can seem like a good idea, but it can result in quickly accumulating significant credit card balances. Always try to pay off the full balance owed every month. |
| ③ Work with partners that report to credit bureaus | Building credit requires working with partners who report credit and financial details to the major reporting bureaus. Some lenders, including SmartBiz and Fundbox do not report to credit agencies and won't build your business credit. |
| ④ Monitor your credit reports | Businesses have credit reports just like consumers. Business credit reports in the United States are typically generated by Dun & Bradstreet, Experian, and Equifax. |
| ⑤ Keep your information current | When you monitor your business credit, always make sure to check if your company's information is yo date. Check to ensure contact information is accurate, there are no unknown trade liens, or other incorrect information. |
While it seems obvious that your business should build credit, what can you do if you have a bad credit score, especially if your credit score is classified as “subprime?” The good news is that if you have bad personal credit, there are ways to improve your credit score to ensure your business’s future success.
About the Revenued Business Visa
The Revenued Business Card Visa® is a combination of a business credit card and Flex Line. Revenued’s revolutionary small business scoring system looks beyond personal credit. Instead, it looks at revenue to offer companies much more than their current personal credit card or business card. W
With instant approvals and flexible spending limits based on business profits, not credit scores, Revenued is also a credit card built for all businesses, regardless of credit score. Once you apply, you’ll receive a funding decision in as little as an hour and have access to your funds within 24 hours.
Other Business Credit Options
Revenued isn’t the only finetech business card. Here are two similar options to Revenued:
 Ramp Visa Card |
 Revenued Business Card Visa® |
 Divvy Credit Card |
| Use to shop at any retailer worldwide that accepts Visa cards | Receive $500 in cash back after spending $5,000 on your card in the first 3 months | Ideal for companies that struggle with expense reports, reimbursements, receipts, and expensive annual service contracts |
| Earn unlimited 1.5% cash back on every purchase | Earn 3% cash back on every purchase | Earn up to 7X on dining purchases, up to 5X on hotels, up to 2X on recurring software subscriptions, and up to 1.5X on all other purchases |
| Add virtual cards to your Apple Wallet or Google Pay | Approvals are based on revenue, not your credit score | Combines seamless expense management software with business cards so you never have to process another expense report |
| Block or restrict spending to a specific vendor – for either a specific card or your entire company | No monthly or annual fees while you use your card or Flex Line | No contract, no obligations |
| No fees – including foreign transaction, setup, or replacement fees | No fees or hard credit checks to apply | No interest rates, no annual fee |
Summing It Up
Building business credit is necessary if you want to shield your finances from the dangers of the market. While many business owners opt for a business checking account and debit card, these processes don’t provide access to the additional capital you need to grow your brand.
These concerns are more pronounced when your personal credit score is poor or non-existent. Fortunately, building credit for your company is straightforward. Still, you will probably need a credit-building business card like Revenued. The Revenued Card provides robust access to credit, an easy application process, 3% cash back on every purchase, and no monthly or annual fees while you use your card or Flex Line.
Related Article: What Is a Business Credit Score?
