One of the most powerful things you can do to help your company’s financial future is to establish and build your business credit history. With a good credit score, you can get higher credit limits, lower interest rates, more favourable offers and terms, plus you’ll be eligible for a variety of different types of credit such as loans, credit cards, lines of credit, micro loans and more.
American Express AIR MILES Gold Business Card
American Express AIR MILES Gold Business Card
Purchase interest rate
Eligibility criteria, terms and conditions, fees and charges apply
American Express AIR MILES Gold Business Card
Apply today and receive 150 AIR MILES® when you spend $1,000 within the first 3 months of card membership. Terms apply.
Purchase interest rate: 19.99%
Cash advance rate: 21.99%
Annual fee: $0
Credit rating: Fair, Good, Excellent
Minimum age: Age of majority in the province/territory of residence
Business credit is a number that represents a company’s risk and ability to borrow money. This means that if a company wants to take out a loan, the lender will consider its business credit as one of the determining factors when making a decision on the application. If approved, it also affects the credit limit you’ll be assigned.
With good business credit you’ll get:
Better payment terms with vendors and suppliers.
Be eligible for more competitive and favourable offers from lenders and banks.
Higher credit limits when applying for a credit card or loan.
Compare business credit cards
How to build and establish business credit
The first step to getting your business credit is to legally separate your personal finances from that of your business. You can do this by establishing a sole proprietorship, a corporation, a partnership or a cooperative.
This number acts like a Social Insurance Number for your business. It is a nine-digit number that helps streamline processes with the Canada Revenue Agency (CRA) and more.
You’ll need to get a business chequings or savings account and make sure you pay all business expenses from this account. Many banks offer complete business services that include access to bank accounts, credit cards, loans and more.
This will help you solidify your business as an entity. To establish your business credit, you’ll want your company to be listed in directories such as the Better Business Bureau (BBB) and the Yellow Pages. With a business phone number, you’ll establish a trade credit relationship with your phone line, which will be reported to the credit bureaus.
You can do this at the three largest business credit bureaus (Equifax, TransUnion and Dun & Bradstreet) and begin building your credit history.
Choose a credit card that reports to the business credit bureaus and start making payments on-time. This is one of the major steps in improving your business credit. If you have a limited credit history, consider a business credit card for no credit.
Work with your suppliers and vendors to establish relationships and build your credit. You can also ask them to report your payments to the business credit bureaus. Most of the bureaus require at least two suppliers to provide information before they can provide you with an accurate picture of your credit.
Late payments negatively affect your business credit. To avoid that, set alerts or automate your credit card payments.
If you’ve got a perfect payment history, working with lenders that report to the business credit bureaus can further help you establish your business credit.
Make sure you update your information at the three business credit bureaus, since you don’t know which bureau a lender will pull your credit from.
Aside from payment history, credit bureaus keep public records, such as bankruptcies, liens and judgments. These records can affect your business credit for many years.
Try not to borrow more than you can pay off. Be mindful of your credit card limit as well— don’t use it all at once if you can’t pay it off. With timely payments and responsible borrowing practices, your business credit will improve.
High credit utilization can lower your business credit score. Having a credit utilization ratio under 30% is generally considered favourable.
There are multiple agencies that keep your credit score, but the largest three are:
Equifax. This bureau offers your credit risk score, which is meant to evaluate the risk of your company and its chance of failing within the next 12 months. Additionally, you can access industry and financial data, as well as your own personal data to make improved decisions.
TransUnion. TransUnion provide both personal and business credit scores. From your credit report, you can extract a variety of data including your business risk credit score and your trade data, which can all help in improving your decision making processes and your company growth. Business credit scores range from 400-800, with 400 being poor and 800 being excellent.
Dun & Bradstreet. You’ll receive three scores from Dun & Bradstreet: your credit score, a delinquency score and a financial stress score. These three scores respectively indicate your credit rating, your ability to pay your bills within 90 days and your company’s likelihood of shutting down completely. You’ll also receive a Paydex score which creates a snapshot of your bill paying habits. To get your scores, you’ll need a D-U-N-S number, which you can get for free on the bureau’s website.
How does a business credit card affect business credit?
Most of your credit-building endeavours will revolve around paying your suppliers and vendors, paying your bills and borrowing from lenders. The easiest and most convenient way to manage this is to get a good credit card for your business needs.
With most business credit cards, you can:
Automate your payments.
Set payment alerts.
Manage and track your spending and the spending of your employees.
Some business credit cards offer specific perks and features that can also help you build your credit, such as:
A 0% or low intro APR period on balance transfers.
Payment flexibility with up to a 55-day grace period.
Can a business card damage my business credit?
If you’re not careful, you can damage your business credit with your business credit card. This can happen when you:
Fail to make timely payments.
Default on your business credit card.
Carry too much debt.
Apply for too many business credit cards in a short period of time.
How to check your business credit rating
To check your business credit rating, you need to:
1. Visit one of the business credit bureaus’ websites. 2. Find your company. On the Dun & Bradstreet website, you need to provide your company’s D-U-N-S number, while on TransUnion and Equifax you’ll need to provide your business name and location. 3. Purchase the report.
Why you should monitor your business credit reports
Your business credit is one of the primary factors that banks and lenders take into consideration when determining whether to lend you money. Much like checking your personal credit report, you’ll need to constantly keep an eye out for any errors or fraudulent activity on your business report.
If you find an error on your report, follow these steps:
1. Check if the same error is on all three credit bureau reports. 2. Next, double check if the data is accurate or if it’s an error. 3. If it’s an error, reach out to the bureaus that list it and explain the issue. 4. Provide proof that supports your claim.
Your business risk score can determine whether you’ll get approved for a loan or credit card for your company – as well as how much your monthly limit will be. This is why you should start building your business credit as soon as you start your company and continually strive to improve it. Frequently check your credit report, and if you notice something amiss, contact the credit bureaus and ask that the error be corrected.
If you follow these steps for building and establishing your credit, you’ll likely be able to score more favourable terms and rates for your business.
Frequently asked questions
Your credit utilization ratio is determined by comparing the amount of credit you’re currently using to the total amount of credit that you have access to. For example, if you have one business credit card with a limit of $50,000 and you’re currently using $5,000, your ratio would be 10% (50,000/5,000= 0.1).
Most lenders like to see a ratio of 30% or less.
If you’re looking to learn more about small business credit cards, read our guide here. We touch on factors that you’ll need to consider before applying for a card, as well as eligibility requirements and more.
If you have a small business credit card, your personal credit score could potentially be affected. This is because some business card providers report to both the business and the personal credit bureaus.
With small business credit cards, you’ll usually need to be personally liable for your card. So if you default on your payments, your personal credit score could be severely affected, as well as your business credit score.
Kliment Dukovski is a credit cards writer. He's written over 600 articles to help readers find and compare the best credit cards. Kliment has also written on money transfers, home loans and more. Previously, he ghostwrote guides and articles on foreign exchange, stock market trading and cryptocurrencies.
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