All about Small Business Credit

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The word "credit" has a fairly loaded reputation, but it doesn't always have to be negative. In fact, there are some situations when it's essential to use various forms of credit to start and grow your small business, provided you do your research and take steps to manage your credit effectively. This is what you need to know about small business credit.


Types of Small Business Credit

There are several different types of credit available to small business owners, including:

    Loans: Bank loans, SBA loans and personal loans

    Lines of Credit: Vendors extending a line of credit

    Leases/Rentals: Leased Equipment and office, store or warehouse rentals

    Credit Cards: Business credit cards with specific terms and benefits


The Benefits of Small Business Credit

There are a number of benefits that comes with using credit in your small business. Here are a few:

  • Credit can help you finance various investments when you're just starting your business.
  • The stronger your business credit history, the easier it will be for your business to acquire future lines of credit, loans and leases.
  • Having a favorable long-term credit history can boost your credit rating and give you access to new financial opportunities because your business may be viewed as financially stable.
  • Business credit makes it easier for you to separate your business and personal finances.
  • The right small business credit card can protect your business with added fraud protection and security measures.
  • Small business credit cards can help your business run more productively by streamlining your bookkeeping processes, making your business purchases quicker and centralizing your bill payment process.

How to Get Small Business Credit

Loans: If you are applying for a small business loan, you will need to provide a business plan that outlines the history and purpose of your business, current and future financial status, and other elements that may impact the potential success of your business.

Lines of credit and leases: These are typically negotiated with vendors and owners of the property and equipment. While it's not always necessary, a business plan and other supporting background information can assist in winning these types of credit as well.


Credit cards: To acquire a business credit card, you should research and compare small business credit cards, interest rates, rewards programs, credit lines and other features. Then, you need to submit an application with important information about your business and the bank will review and decide what how much credit to provide, if any.

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How to Build a Positive Credit History


When you have small business credit, you need to consistently manage your credit history to ensure all of the information contained in your credit file is accurate. This will help boost your credit rating while working to prevent the risk of business identity theft.

Many of the best practices involved in managing and maintaining small business credit are similar to those you would follow with personal credit. For example, you should take steps to:

  •     Pay your bills on time
  •     Keep track of interest rates
  •     Conduct sufficient research before attempting to get small business credit
  •     Ensure you're able to pay back what you borrow (and have a plan in place to do so)
  •     Avoid co-mingling business and personal credit

Perhaps the most important part of small business credit is getting in the habit of only using the credit you need and paying it off as quickly as possible. Credit is best treated as a way to support your business, not sustain it entirely.

With conscious planning and foresight, however, smart small business credit can help you establish financial stability, and give you additional resources to grow your business.