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How to Improve Your Business Credit to Get Better Loan Terms

How to Improve Your Business Credit to Get Better Loan Terms

Having good business credit is essential for getting the best possible terms on business loans and lines of credit. Unfortunately, many business owners don’t pay enough attention to their business credit reports and scores until they need financing. By being proactive and building your business credit history, you can qualify for better rates and terms when you do apply for a loan. Here’s what you need to know.

Monitor Your Business Credit Reports

The first step is to check your business credit reports from Experian, Equifax, and Dun & Bradstreet. You want to make sure the information shown is accurate and that there are no errors that could negatively impact your scores. Go through each report carefully and dispute any inaccurate information. Getting errors removed can give your scores a boost.

You should also confirm that all your current credit accounts are reporting properly. Any late payments will drag down your scores, so you’ll want to correct those by contacting your creditors. Stay on top of your reports by checking them at least every 3-4 months. You can get free reports from Nav and other sources.

Build Trade Credit References

An easy way to build your business credit is by establishing trade credit accounts with various vendors and suppliers. Instead of paying upfront, you can set up net 30 or net 60 terms and pay your bills later. As you pay on time, those positive payment experiences get added to your business credit file.

Some good companies to open trade credit with include Uline, Grainger, and Sam’s Club. Make sure any new accounts report to the business credit bureaus.

Get a Business Credit Card

Business credit cards are another essential item for your credit profile. They establish that you have access to revolving credit. Using the cards responsibly by keeping balances low and paying on time will help your scores.

Cards to consider include the Capital One Spark Cash Plus, Ink Business Cash Credit Card, and Wells Fargo Business Platinum Card. Make sure any card you apply for reports to the business credit bureaus.

Take Out a Small Business Loan

One of the most effective ways to give your business credit an immediate boost is to take out a small loan and repay it on time. Even a loan for $1,000 – $5,000 that you quickly pay back can show other lenders that your business handles credit responsibly.

Banks usually don’t offer such small loan amounts, but you can get one from an online lender like Fundera, Kabbage, or OnDeck. The interest rate might be higher than a bank loan but could be worth it for the credit history. Make all your payments on time to get the maximum score benefit.

Become an Authorized User

If your business has any close affiliations with other companies, consider asking to become an authorized user on one of their credit cards. Their positive history will start being factored into the calculation of your business credit scores as an authorized user.

Obviously, this only works if the other company pays its bills on time. And you want to avoid any cards with high utilization rates. But it can be a quick way to establish length of credit history for a newer business.

Check Your Personal Credit

For small and newer businesses, your personal credit still factors heavily into loan approval decisions and terms. Work on improving your personal credit by paying all bills on time, keeping credit card balances low, and correcting any errors on your credit reports.

The stronger your personal credit, the better terms and rates you can qualify for on business loans until you build up your dedicated business credit profiles. Aim for a personal FICO score of at least 720 if possible.

Consider Getting a Cosigner

If you have poor personal credit or a short credit history for your business, getting a cosigner may help you qualify and get better rates on a small business loan. The cosigner agrees to be responsible for repaying the loan if your business can’t cover the payments. In exchange, you benefit from using their stronger credit profile.

Choose a cosigner wisely – someone with excellent credit and financial stability. And have a clear agreement in place for making payments so their credit doesn’t suffer either. A cosigned loan also helps strengthen your business credit for future financing.

Review Financing Options Before Applying

Too many loan applications in a short period can actually hurt your credit scores and jeopardize your approval odds. Before formally applying anywhere, research multiple lender options and terms. Pre-qualify where possible to check potential rates/terms with a soft credit check only.

Once you’ve identified the best loan choice, put all your focus on completing that one application first. Only if denied should you consider applying elsewhere. Space out applications by at least a few months each time.

Provide Collateral If Possible

Putting up business assets or personal assets as collateral can help you get approved for better loan terms. The collateral guarantees the lender they can seize and sell those assets if your business defaults on the loan. In exchange for taking on less risk, the lender can provide more favorable interest rates.

Potential assets to use as collateral include business equipment, accounts receivable, real estate equity, securities or CDs. Just be cautious when using personal assets, as your home, car, or funds could be at risk if the business struggles.

Work on Post-Financing Habits

Don’t make the mistake of only caring about your business credit right before you need financing. Continue monitoring your credit reports and scores even after getting approved for a loan or credit account. Payment history on those new accounts will help strengthen your profiles as long as you pay on time.

Set reminders for when payments are due and automate them whenever possible. Even being a few days late can result in credit damage and penalty fees. Maintain low revolving credit utilization rates as well. Your future financing options and terms will benefit from consistently strong credit management.

Leverage Financing to Grow

The ultimate goal in seeking financing should be using those funds to help your business grow. Whether it’s investing in new equipment, expanding locations, or hiring more staff, choose loans that align with your growth strategy. Then actually put the financing to work so your company becomes more profitable.

With the improved cash flow and financial strength, you’ll find it easier to repay the loans responsibly. That leads to an even stronger business credit standing – allowing you to qualify for your next round of growth financing with great rates and terms. It becomes a positive cycle that leads to long-term business success.


Building strong business credit takes diligence and patience, but the payoff in better loan terms makes it worthwhile. Follow these steps to monitor, establish, and responsibly manage your business credit profiles with all three reporting bureaus. Over time, you’ll graduate to creditworthy borrower status so you can fund growth initiatives at competitive rates. Reach out to one of our helpful business credit advisors for personalized guidance and action steps relevant to your unique situation.

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