Due diligence

How to Build and Maintain Strong Business Credit

by Nicolae Buldumac
How to Build and Maintain Strong Business Credit

Having a good credit score can ultimately be the difference between success and failure for your business. Given that these reports are available to anyone who wants to see them, including potential lenders and suppliers, it is vital that you are aware of the information that yours currently contains.

Despite the advantages that a good business credit score can bring, many businesses fail to prioritise maintaining theirs, and in fact some do not possess one at all. Thankfully, there are a number of ways in which your company can ensure your credit is in the best possible shape, or even build a credit history from scratch if need be.

What is it and why is it Important?

A business credit score tells others how responsible your company has been with finances, and therefore helps them make an informed decision regarding whether or not to lend to you. A number of different factors are used to determine the score, including information from banks and other credit providers, information on County Court Judgments (CCJs), and records from Companies House. Your track record of payments to other companies is also taken into account.   

Having a good business credit score is imperative for a number of reasons; first and foremost it can help to secure funding in order to start or grow your business; you can save money through lower interest rates, and also win contracts and give a better overall impression of your company.

As is shown in the chart below from the 2015 Small Business Credit Survey, obtaining finance can be tricky for businesses of all sizes; 41 percent stated that they hadn't been able to get any of the funding they applied for. Putting the effort into building and maintaining a healthy credit score is the best way to give your company the best chance at being approved.


Building Business Credit

Before you can go about improving your business credit score, you'll want to find out what yours currently looks like, if indeed you do already have one. Start your search here with Global Database's Business Credit Reports.

Don't panic if you find that your business does not currently possess a business credit score; there are a number of steps you can take to build one, as we will explain below. It's best to get started on this as soon as possible; generally speaking, a long credit history will be viewed more positively, so the quicker you begin to create your business credit file, the more advantageous it will be.

Consider Your Business Structure

The way that your company is set up can play a part in your credit score, and ultimately determine how easy it will be for you to borrow money. Though many small businesses may start life as a sole proprietorship, doing so means that you and your business are considered a single entity, and you are therefore unable to build separate business credit.

Corporations and Limited Liability Companies on the other hand allow you to separate your personal and business credit, meaning your own financial reputation is somewhat protected, and lenders will also be much more likely to approve your applications.

Apply for an EIN

In order for your business to be recognised as a separate entity, you'll need to apply for an Employer Identification Number (EIN) from the IRS. This unique number will then be used when you file corporate taxes, and is also usually required when it comes to opening a business bank account or applying for a line of credit with the bank.

Separate Your Finances

As we mentioned earlier, keeping your personal and business financials separate is imperative when it comes to building business credit. Although you may need to use your personal record to obtain funds while setting up your business, you should aim to separate the two as early as possible. In order to do so you should take steps such as opening a separate bank account and using a business address and phone number instead of your personal details.

Apply for a Credit Card

Using a business credit card instead of a personal one is a great way to create credit history, and they are usually easy enough to obtain; according to the 2015 Small Business Credit Survey, 80 percent of businesses reported that they were approved for one. However, it is worth noting that some business credit cards are actually still tied in with personal credit -- make sure you give the terms and conditions a thorough read through before signing on the dotted line, as these types of accounts will not be much good for building business credit.

You could also apply for one or more small loans, known as microloans, in order to build up your file. These are generally easier to get, and borrowing smaller amounts means less risk when it comes to paying it back.

Personal Investment

When trying to obtain credit from banks and other lenders, they will usually look at how financially invested you are personally in your business; they want to see that you are committed and that you believe in what you're doing. Therefore, going straight to the bank for a loan without having put in any money to the business yourself can be a mistake; ideally you need a track record that demonstrates success from your own financial input.

Trade References

If your business regularly purchases supplies such as manufacturing materials or cooking ingredients through third-party vendors, you should ask if they will allow you trade credit. This means that you can pay for the goods purchased after you've received them, be it days or weeks, depending on the agreement. Once you've established this line of trade credit, ask your vendor to report your payments to a business credit bureau, and after a few successful repayments you will have positive credit references for your business.

While building your business credit it's important to remember that there are some factors that will remain out of your control; for example, larger companies and those with more employees will always be favoured by lenders, and as is evidenced in the table below from the 2015 ISED Credit Condition Survey, the industry you are in will also play a part in your chances of approval.

Maintaining strong business credit

Once you've established your business credit score, you'll want to ensure that it continues to be a positive reflection of your company. Therefore it is important to take the time to actively maintain it, using the steps below.

Timely Payments

Although obvious, ensuring your business pays invoices on time is the best way to keep your credit as strong as possible, as all of the credit bureaus will take this history into account when determining your score. Ideally you should aim to make payments early, as some bureaus will only assign a perfect score to businesses that pay ahead of their due date.

You should also bear in mind that how much of your credit you use will also be taken into account. For example, if you continue to use the maximum amount it will signify that you are experiencing cash flow problems and could negatively affect your credit rating as a result. Instead, you should aim to only use around 25 percent of your credit limit if possible.

Check Your Information

Make sure to regularly check your credit report and update it with any changes in name, address, or phone number. All of this information needs to be the same in both your supporting documents and credit file in order to maintain business credit and avoid any confusion when lenders or other companies attempt to seek out your record.

Credit References

In order to maintain your healthy business credit and ensure it is kept current, you should try to continue working with suppliers and lenders who report your payments to credit bureaus wherever possible.


You should get into the habit of monitoring your business' credit score in order to notice any changes or errors as soon as they occur, and you'll also be able to keep track of when someone is inquiring about your business' credit; the company name will remain confidential but you'll be able to see the industry they're in and the date they made the inquiry.

Checking up on your own credit score will never have a negative impact, and it's also worth doing it regularly in order to look out for any suspicious activity being noted in your file that could signify your credit details being used fraudulently by others; obviously the sooner this kind of situation is rectified the better.

With Global Database's Business Credit Reports you can not only check and track your credit score, but also effectively manage it. With our reports you are able to find out what factors are affecting your score, enabling you to take the steps required to improve it when needed.

Protect Your Business

Don't forget to check up on potential business partners, vendors and customers for credit risks by seeking out their credit scores too -- avoiding any potential non-payments or risky deals will ultimately protect your own score in the long run, as well as your business in general.

This process is made quick and easy with Global Database's Business Credit Reports; you can obtain background information on a business including any liens, judgments, and bankruptcies as well as viewing their credit score and a suggested credit limit using our unique methodology. Your company can then make an informed decision when it comes to assessing the financial risks of potential business deals and reduce exposure to bad debt.

When it comes to building and maintaining your business credit score it's important to remember that all of this will not occur overnight; in fact the average business needs 12-18 months to improve its credit score, according to Cardhub. Building and maintaining healthy business credit is an ongoing process that can take a little work, but one that is ultimately worth the time and effort due to the advantages it can bring to your company.

Global Database is a market leader in company intelligence, known for our high levels of accuracy when it comes to data. Our business credit reports feature makes quick work of both maintaining your own score as well as screening other companies.

Want to find out what we can do for you? Contact us for a no-obligation chat on +44 203 640 6006 or info@globaldatabase.com


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