Having a low personal credit score doesn't mean your business dreams are over. While it makes things harder in the short term, there are strategies to build business credit separately from your personal profile.
Incorporate Your Business
The first step to separating business and personal credit is to incorporate. A sole proprietorship is legally the same as you, so there's no separation. A corporation is a separate legal entity that can build its own credit profile.
In Canada, you can incorporate federally or provincially. Provincial incorporation is usually cheaper and faster for businesses operating in one province.
Get a Business Number
Register for a Business Number (BN) with the Canada Revenue Agency. This is like a Social Insurance Number for your business and is required to open business accounts and build business credit.
Open Business Banking
Open a business bank account in your corporation's name. Keep business and personal finances completely separate. This creates a paper trail that shows your business is legitimate and operating independently.
Start with Supplier Credit
Many suppliers offer net-30 or net-60 payment terms, meaning you can buy now and pay in 30-60 days. These accounts often don't require a personal credit check and can help build your business credit profile.
Look for suppliers that report to business credit bureaus like Dun & Bradstreet. Not all do, so ask before opening an account.
Secured Business Credit Cards
Just like personal secured cards, you can get a secured business credit card by putting down a deposit. Use it for business expenses and pay it off monthly to build positive payment history.
Meanwhile, Fix Your Personal Credit
While building business credit, don't ignore your personal score. Many business financing options still require a personal guarantee, especially for newer businesses. The higher your personal score, the better terms you'll get.
We can help you improve your personal score while you build your business credit. Many of our clients are business owners who need both.
The Long Game
Building business credit takes time, usually 1-2 years to establish a solid profile. But once established, it opens doors to larger credit lines, better terms, and financing options that don't rely on your personal credit.