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How to Build Credit as a Sole Trader

Being a sole trader is a great position to be in.

You are in charge of your business, and get to make the key decisions that help it grow.

One important aspect of operating a business as a sole trader is keeping your financial health looking strong.

For a business that wants to scale, or may need an injection of cash to help them get through a troubling time, having good credit can be a big help, especially if you’re looking to take out a sole trader loan.

A good credit history can open the door to better financing options, favourable interest rates, and the availability of a loan that suits you.

But how can you build a good credit score as a sole trader?

Well, here at Smart Funding Solutions, we work with a wide range of businesses every day, including sole traders, and we’ve created this guide to answer that question.

Let’s take a look.

The Importance of Good Credit for Sole Traders

For any individual, good credit is important.

Whilst having bad credit doesn’t mean you can’t get a loan; a good score makes it much more achievable.

Good credit is your pathway to a better loan and a loan that is more on your terms.

In a nutshell, if you can showcase a history of good credit, a lender is a lot more likely to trust you, and to believe that you can pay back the amount they are offering.

This will lead them to be more willing to negotiate and offer better terms.

It is important in other ways as well, including:

  • Leasing and Renting Space – If you decide you need an office, having a good credit score will help you negotiate rental terms and make it much more likely to be accepted.


  • Increased Credibility – For investors, if they know they are putting their money into someone who is professional and has a good payment history, they will be much more assured.


  • Financial Safety Net – Nothing is certain in business, and you never know when you may need a loan. Having good credit gives you the peace of mind that if financial help is needed, you will be able to get it.

These aren’t the only reasons good credit is essential, and if you’re looking to increase yours, here is how you can do it.

sole trader doing business

7 Tips on Building Credit for Sole Traders

Properly Register Your Business

Ensure your business is properly registered with the appropriate local authorities and has a legal business name.

This is a foundational step for establishing business credit.

Without this, you will not have a business for which you can build a score. Registering your business creates a distinct entity, and separates your companies finances from your personal ones.

This is a way of enhancing your credibility, protecting your assets, and beginning to build a positive credit history for your business, so should always be one of the first steps you take.

Open a Dedicated Business Account

Open a dedicated business bank account to keep your business finances separate from your personal finances.

This helps demonstrate the financial stability and legitimacy of your business.

While you may have loans in your personal and business life, separating the two will allow potential lenders to solely focus on your business credit, and not look into any other bank accounts.

By looking into business credit independently, a much clearer picture of your finances can be attained and a positive business credit score can be built, separate from your personal finances.

Grow a Positive Payment History

This is a key point in business and in life, and what a lot of building a positive credit score boils down to.

To improve your credit score, you must ensure you are financially responsible and always paying your bills in time.

This includes credit cards, business loans, leases, and other financial obligations.

Timely payments are a key factor in building good credit.

If you can grow this on your business account, then you’re sure to see a great score in no time.

Get a Business Credit Card

Consider applying for a business credit card.

Use it responsibly and pay off your balance in full each month to show your ability to manage credit.

Again, this is all about showcasing your financial responsibility as a business.

If you are paying off loans and other fees, then being able to add a credit card as another form of financing you are paying back in time is a great way of increasing your credit score.

Take Out Small Business Loans

As your business grows, you might need a financial boost every now and then.

Applying for small business loans and repaying them on time can positively impact your credit history.

A small business loan can be beneficial for sole traders in many different ways, and being able to showcase that you can take them and pay back the instalments in the time agreed upon is a sure way to increase your credit score.

As mentioned in the previous section, adding another credit type to your list is always a way of improving your score.

Manage Growth in a Responsible Way

As your business becomes more established and profitable, its creditworthiness will improve.

Make sure to manage growth responsibly to maintain good credit practices.

For any sole trader, it can be exciting to see your business grow in the way you want it to, but you must make sure you maintain a positive payment history, or else your credit may drop and you will be stuck with a low score.

By growing your business responsibly and ensuring your finances are always well maintained, you will organically improve your credit score and your business will be in a better place for it.

Get a Business Credit Report

Just like with personal credit, regularly monitor your business credit report to ensure accuracy and catch any potential issues early.

To improve your credit score, sometimes you need to get an overview of your current position.

From here, you can see which elements of your finances are dragging you down, and look into ways of improving things.

A business credit report is a great tool for providing insight and advice, and can be invaluable in getting your credit score where it needs to be to be able to get the loans you need.

sole trader working at a desk

Sole Trader Loans from Smart Funding Solutions

If you’re a sole trader and you’re looking for a loan, why not get in touch with the team at Smart Funding Solutions.

We can discuss your options with you, and in most cases have an answer and the funding withing 48 hours.

Whether you know your credit score or not, we can perform a full assessment and provide tailored advice.

So, if you need to get your finances in order today, we are the team for you, so why not apply today?

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