5 Business Credit Mistakes That Can Cost You Funding (And How to Avoid Them)

Building strong business credit is essential for securing funding, getting better loan terms, and scaling your business. However, many entrepreneurs make common mistakes that can hurt their credit profile and limit their financial options. In this guide, we’ll break down five costly business credit mistakes and provide actionable steps to avoid them.

Mistake #1: Mixing Personal and Business Finances

One of the biggest mistakes business owners make is using personal credit for business expenses. This can lead to:

• Higher personal credit utilization, which lowers your personal credit score.

• Difficulty separating personal and business finances for tax and accounting purposes.

• Missed opportunities to build strong business credit.

How to Fix It:

• Open a dedicated business bank account.

• Apply for a business credit card and use it exclusively for business expenses.

• Establish your business as a separate legal entity (LLC or Corporation) to protect personal assets.

Mistake #2: Not Establishing Business Credit Early

Many entrepreneurs wait too long to start building business credit, which can delay access to funding when it’s needed most.

How to Fix It:

• Register for an EIN (Employer Identification Number) with the IRS.

• Open accounts with vendors that report to business credit bureaus (e.g., Uline, Quill, Grainger).

• Pay business bills on time to establish a positive payment history.

Mistake #3: Ignoring Business Credit Reports

Just like personal credit, your business credit report needs regular monitoring. Errors or inaccuracies can lower your credit score and make it harder to qualify for financing.

How to Fix It:

• Check your business credit reports regularly with Experian, Equifax, and Dun & Bradstreet.

• Dispute any incorrect information immediately.

• Keep track of your business credit score using services like Nav or CreditSignal.

Mistake #4: Late or Missed Payments

Timely payments are the foundation of good business credit. Late or missed payments can damage your business credit score and make lenders see you as a high-risk borrower.

How to Fix It:

• Set up automatic payments for recurring bills.

• Use accounting software like QuickBooks or Wave to track due dates.

• Build an emergency fund to cover unexpected expenses and prevent late payments.

Mistake #5: Applying for Too Much Credit at Once

Submitting multiple credit applications in a short time can trigger hard inquiries, which may lower your business credit score.

How to Fix It:

• Only apply for credit when necessary.

• Space out credit applications to minimize the impact on your credit score.

• Focus on building relationships with lenders before requesting funding.

Conclusion

Avoiding these five business credit mistakes will help you build a strong financial foundation for your business. By keeping your finances separate, establishing credit early, monitoring your reports, making timely payments, and being strategic about credit applications, you’ll position your business for long-term success.

Learn more or get a free business consultation with Erika to jumpstart the process:

👉🏽 Start here.