How Business Loans Can Help You Build Your Credit

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Reviewed by Matt Pelkey
• 4 minute read
How Business Loans Can Help You Build Credit

Good business credit can open doors. Just like your personal credit score, a good business credit score can make it easier to get funding and to get it at better rates. This gives you access to capital, which can help you grow your company, expand your inventory and cover everyday expenses. It’s an essential tool that will help you on your journey to success.

Building good business credit can feel like an uphill battle, but with the right plan and the right financing it doesn’t have to. Used correctly, a business loan can give you just the start you need. Here’s how.

How To Build Business Credit With Business Loans

Business loans are a great form of financing that can help you build your credit score. You’ll receive the funds you need now while also establishing a positive credit history. There are a few things to consider when building your credit through loans.

  • Choose a Loan That Reports to the Credit Bureaus — To ensure a loan will help build your credit score, you’ll need to confirm that the lender reports to one of the three business credit bureaus. It’s worth a little research to make sure you’re reaping the rewards.
  • Maintain an Excellent Credit History — Building business credit means maintaining a good credit history by making payments on time, applying for credit only when necessary and keeping your utilization rate low. You can check your credit report with the three business credit bureaus and ensure that there are no errors or mistakes:
  • Give It Time — It can take time to build business credit. The good news is that you can start today. Online lenders and other financing options are available to you, even without a perfect score. You can apply for a business loan or a line of credit that will help you establish a good credit history and build your business’s score.

How Loans Affect Your Score

Business loans affect your business credit score much like personal loans affect your consumer credit score. If you pay on time, don’t overapply and keep your credit utilization rate low, you’re probably in good shape

  • Payment History — On-time payments account for a big portion of your business credit. Late or missed payments can damage your score significantly. If you’re having trouble keeping up or you think you’re going to be late, contact your lender ahead of time to see if you can come up with a plan together.
  • Applications — When you apply for a loan, lenders will often do a hard credit check, which can ding your score by a few points. This isn’t a big deal unless you apply too much. Not only will overapplying damage your score, but it may signal to lenders that you’re desperate for credit, which can be a red flag.
  • Credit Utilization Rate — If you use a revolving form of credit, like a line of credit, try to keep your utilization rate low. The business credit bureaus see a pattern of consistently maxing out a credit limit as risky and it’s reflected in your score.

Why a Good Business Credit Score Is Important

A good business credit score keeps you and your company on more solid financial footing. It protects you and allows your company to thrive. A business credit score is important in the same ways your personal credit score is, but there are a few other factors to take into account as well.

  • It Protects Your Personal Finances — Being able to fund your business as an entity separate from yourself will help protect your financial standing. Many entrepreneurs rely on personal credit cards or loans to help fund their start-up, putting their own finances and credit score at risk. It also means that your business won’t have the opportunity to build credit, making it more difficult to obtain a business loan when you need it. Small business loans are typically much larger than personal loans and can cover the costs of big projects and expenses.
  • It’s Good for Business — This number helps those you want to partner with decide if your business is trustworthy. A good score can make it easier to get financing from lenders, assure investors that your business is financially sound and help you qualify for better terms from vendors and insurance agencies.
  • It Increases Your Company’s Value — A good business credit score can increase the value of the company. Because the score is transferable, when the business is sold the new owner benefits from the company’s positive credit history. This makes a good business credit score an asset.


This content is for educational and informational purposes only, and is not intended as financial, investment or legal advice.