Chapter 8: Credit
Business credit is linked to your business’s Employer Identification Number (EIN), not your Social Security number. It reflects your business's ability to repay debts and is crucial for securing financing, favorable vendor terms, and scaling operations.
To build business credit, you generally need to own at least 15% of the business and separate your personal and business finances. Establishing accounts with vendors who report to business credit bureaus and responsibly managing business credit cards or loans can help improve your business credit profile.
Business credit cards offer a range of benefits that make them powerful tools for managing and growing a business. One of the most immediate advantages is the higher credit limits they provide compared to personal credit cards. Since businesses often deal with larger and more frequent expenses such as inventory purchases, travel, advertising, and vendor payments, having access to more credit helps ensure smooth cash flow. A higher limit also means it’s easier to keep your credit utilization ratio low, which is beneficial for building a strong business credit score.
Another key advantage is that most business credit cards do not report everyday activity to personal credit bureaus, as long as the account remains in good standing. This means that high spending on your business card won’t negatively impact your personal credit utilization or score. However, if the account becomes delinquent or you default, the issuer may report the negative behavior to your personal credit file—especially if you personally guaranteed the card.
Using a business credit card responsibly also helps you build a dedicated business credit profile. Activity from your business card is reported to commercial credit bureaus like Dun & Bradstreet, Experian Business, and Equifax Business. Establishing a strong credit history under your business’s name can help you qualify for larger lines of credit, lower interest rates, and favorable terms with lenders and vendors. It also adds legitimacy to your business in the eyes of financial institutions.
You can also issue employee cards with customizable spending limits, allowing your team to make purchases while you retain full oversight and control.
Lastly, responsible use of a business credit card can make it easier to access additional credit and financing options in the future. Many card issuers offer pre-approvals for business loans or lines of credit based on your payment history and account usage. This can be especially helpful for funding growth opportunities or managing seasonal fluctuations in revenue.