The 5c’s of Business Credit

Updated: Nov 28, 2021

Have you thought about your business credit or how it may affect your company’s reputation? In many ways, business credit, is similar to personal credit. You need strong personal credit to buy a house, get a loan, or apply for a credit card. Having a strong business credit file may improve your company’s chances of qualifying for business loans, receiving lower interest rates, and increasing cash flow. It may even help you negotiate better payment terms and attract new customers. But what is business credit? What are the implications of separating your personal and business credit?

The 5c’s of Business Credit

Creditworthiness is one of the most basic concepts in business credit, whether you’re a company seeking a line of business credit or you’re a company considering extending a line of credit to a customer. Creditworthiness is how a company is evaluated or considered by another company to determine if they’re “creditworthy.” If you’re a company seeking a line of business credit, imagine how your suppliers might view you and what their concerns might be when considering if and how to work with your company.

Most of the time, it all boils down to this: Is your company capable of paying the invoice in full, on time, and within terms?


Most companies that extend business credit have a set of criteria that they use to determine a customer’s creditworthiness, which can be both subjective and objective.

Subjective criteria can include things like whether the customer seems easy to work with or comes across as honest and trustworthy over the phone or in person.

Objective criteria tend to include things such as whether your financial statements show you have sufficient cash flow to pay the invoice or whether your trade references show your company has previously paid on time

One of the most well-known formulas to determine creditworthiness is the “5Cs of credit”: capacity, capital, character, collateral, and conditions.

Capacity, Capital, Character, Collateral, and Conditions

Capacity – What is the business’s financial capacity to pay its invoices? Does it have sufficient cash flow? Is it heavily saddled with debt? Business credit applications typically ask the applicant to supply bank references, trade references, and financial statements. These documents will reveal the applicant’s capacity to pay. If an applicant can’t provide financials or references, credit managers will need to find other ways to assess the company’s capacity to pay. Many consult business credit reports, which contain scores and ratings that can reveal a potential credit risk.

Capital – Capital describes the financial and non-financial assets that a business holds, as well the amount of money the business owners have invested in their company. If the financial assets listed in the financial statement demonstrate growth (such as owning instead of renting a vehicle fleet), that may imply a lower risk of non-payment. Of course, having a financial statement makes it easier for a credit manager to assess the credit-seeker’s capital strength.

Some industries are more capital-intensive than others, and this is where the non-financial assets – including real estate, inventory, machinery, and other equipment – can be helpful in determining creditworthiness. Those industries that require major investments in inventory and equipment may seem riskier than those that operate with a lower overhead, but this is where the credit manager’s expertise comes into play. Their knowledge of various industries and trends can help assess financial strength.

Character – Credit managers use a character judgement to help determine if an applicant seems willing to honor their debt. Trade references, payment records, and a clean legal history in the business credit report help illustrate character. Otherwise, character is subjective, and many used to consider it the most important “C.” Before credit decisions were automated, the credit profession placed a strong emphasis on the applicant’s character and the professional relationship between the customer and the credit manager. If they knew their customer’s business well, they would be more willing to work with that customer account in times of slow payments. A customer that doesn’t return phone calls or emails may wind up having their invoice sent to collections, which can hurt the business’s chances for future credit requests.

Collateral – Applicants with a questionable credit history may be asked to put up collateral to secure their debt obligation for a high line of credit, the same as any other type of loan. Here, the inventory, machinery, and other equipment noted under Capital as assets can be used as collateral. While collateral offsets the lender’s risk, it’s important to remember companies would rather work out a payment plan with their customers than try to seize an asset as part of the collections process.

You Can Build Business Credit with Only Your EIN…Really!

Yes! Building business credit with only your EIN only is a real thing!

So many people ask me, “Are you joking?” “How sway?”

That’s because the ability to build credit in only your business name is not common knowledge, and if you’ve ever applied for business credit before meeting me, you probably were asked to supply your SSN, and your personal credit was pulled. But what if your personal credit isn’t winning an Academy award anytime soon and you can’t be a personal guarantor?

Even if you have good personal credit, building your business credit helps you get even more money… and without a personal guarantee (meaning you are not signing your life & personal credit away to obtain credit for your business). Business credit is credit in a business name, that’s linked to the business’s EIN number, not the owner’s SSN.

When done properly, business credit can be obtained with no personal credit check and no personal guarantee…

How to Start Building Business Credit

Most consumer credit starts with secured credit cards or an account that has a co-signer, but cosigned accounts and secured accounts really aren’t popular or widely used in the business world. Most business credit starts with VENDOR accounts instead. VENDOR accounts are accounts that typically offer terms such as Net 30 or Net 60 revolving so if you get approved for $1,000 in vendor credit and use all $1,000 of it, you’d need to pay that money back in a set term such as within 30 days on a Net 30 account. In contrast, a Net 60 account would need to be paid in full within 60 days. Unlike with revolving accounts, you have a set time you must pay back what you borrowed or the credit you used. Many people have heard about Quill and Uline as starter vendor accounts, but did you know there are hundreds? Many starter vendors not only provide products but are service providers for everything from graphic design, temp-staffing, web design, online marketing, installation services, etc. You just need to know who to go to and how to apply.

This is where I come in...

You know who’s also one of these vendors that help start off your business credit journey? You guessed it….ME. I provide an initial vendor credit line to all my clients and report their on-time payments to the credit bureaus, making your business appear a lot more lend-worthy to potential creditors.

So, to recap:

To start your business credit profile the RIGHT way, you need to get approved for vendor accounts that report to the business credit reporting agencies. Once you’ve done this, you can then use the credit, pay back what you used, and the account gets reported to Dun & Bradstreet, Experian, or Equifax. Once reported, you have tradelines, an established credit profile, and an established credit score. Then you can move on to revolving store cards, and finally on to cash credit.

To learn more, please send an email to!


Hi there! I’m Nakia Wade – and I’m obsessed with helping small and minority owned businesses and entrepreneurs succeed!

Since 2015 I’ve worked as, a Mass Issuance Coordinator, at Computershare Investment Services focusing my time on helping the world’s leading organizations maximize their relationships with investors, employees, creditors, members, and customers.

Prior to this role, I was at Customer Service Manager at First Data Merchant Services, where I spent 8 years helping build, develop, and grow processes and procedures for the internal and external businesses and the customers they serve. This work resulted in the development of some cool digital products we all know and use today like Google Wallet, Clover, Square, and many other products that have formed in the FINTECH world.

I’m always happy to connect with like-minded professionals. Shoot me a message – I look forward to hearing from you!

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