What Is Business Credit?

Business credit measures an organization’s ability to obtain services and goods based on an agreement to pay for them later, which includes securing loans.  Business credit allows an organization to essentially borrow against the assets of the business, rather than the owner’s personal property.

Business credit is very different from personal credit in that the items and services acquired through business credit are used for commercial reasons only. Organizations can use business credit for anything from office furniture and supplies, to employee uniforms and manufacturing equipment. It is not uncommon for businesses to utilize cash loans from business credit to fund start-up costs and/or operational expenses.

Typically, business credit does not require any personal credit checks.  But for new businesses, and at times established businesses, personal security is necessary in order to receive business credit. This on occasion would hold the individual liable for business debts. If a business owner is held personally liable, this could affect their personal property in the event the debt goes unpaid. In these cases, seeking legal advice is always best to ensure your business structure is secure and your personal property is not placed at risk.

A credit application is the first step to acquiring business credit. Each credit granting institution has their own application and procedures.  Many companies have very strict credit-eligibility standards, while others are less strict and require far less requirements.