Business credit in Canada: how it works and how to build it

Your business can have a credit record of its own, separate from yours. For a young or small company it is usually thin, which is why lenders lean on the owner's personal credit and a personal guarantee instead. Building the business's own record takes time, and it pays off in better terms and fewer questions later.

Business credit and personal credit

Personal credit is your own history as a borrower — cards, car loans, mortgage — kept by Equifax and TransUnion in Canada.

Business credit is the company's history: how it pays suppliers and lenders, public records such as registrations and legal judgments, and its size and age. In Canada the main business credit bureaus are Equifax and Dun & Bradstreet.

For most small businesses, lenders look at both. The smaller and younger the company, the more weight falls on the owner's personal credit.

How a business credit record is built

A business credit file fills up from:

• Suppliers who report. Trade credit — net 30 or net 60 terms from suppliers — is often the first thing on a business's file, but only if the supplier reports to a bureau. Not all do.
• Lenders and card issuers that report business accounts.
• Public records — incorporation, registrations, liens, judgments.
• Trade references you submit yourself, where the bureau accepts them.

Practical steps to build it

1. Incorporate and register properly. A business number, a consistent legal name and address everywhere.
2. Open a business bank account and use it for everything. Your bank statements are what most lenders read first — see why six months of statements.
3. Get trade credit from suppliers, and ask whether they report payment history. Pay on or before the due date.
4. Use a business credit card or small line of credit in the company's name, and pay it on time.
5. Check your file. Ask Equifax and Dun & Bradstreet for your business credit report, and dispute anything that is wrong.
6. Keep personal and business separate. Paying business bills from a personal card builds nothing for the business.

What damages it

• Paying suppliers late, repeatedly
• Legal judgments or liens registered against the company
• Bounced payments and returned items (these also show in your bank statements, which matter more — see what an underwriter is looking for)
• Too much debt taken on at once

How much it matters when you borrow

It depends on the lender:

• Banks weigh credit — business and personal — heavily, alongside financial statements and security.
• Alternative lenders read your bank statements first. Deposits, consistency and what you already owe usually matter more than any score. Business loans with bad credit covers what credit changes and what it does not.

The long game

A business with a few years of clean supplier payments, its own credit accounts in good standing and steady statements can borrow on better terms — and, over time, with less reliance on the owner's own credit and guarantees. See personal guarantees explained for why that matters.