77% of Small Business Owners Worry About Accessing Credit. Here's What to Do if You're One of Them

The number of small business owners who are concerned about accessing credit has changed dramatically in the past year. In April 2022, a Goldman Sachs survey showed that 77% of business owners were confident about raising capital. One year later, and that number's been turned on its head. In April 2023, 77% of owners said they were worried about how they'd access credit.

Small businesses face significant credit challenges

Almost 1 in 5 of the owners surveyed by Goldman Sachs had applied for a loan in the past three months. Of those, over 60% said it had been hard to access affordable credit. Access to affordable credit can be crucial, whether it's to fund the initial start-up costs or expansion. A large proportion of business owners are able to use personal savings to get their companies off the ground, but that's not always possible.  

If you're a small business owner trying to qualify for financing, here are some steps you can take.

1. Build your business credit history

Just as a strong personal credit history makes it easier to borrow money, a business credit history can help your company access credit. If you haven't already incorporated your business or formed a limited liability company, this is the first step. You'll also need a federal employee identification number (EIN), which is similar to your Social Security number. 

The credit bureaus that deal with businesses are Dun & Bradstreet, Equifax, and Experian. The Small Business Association recommends setting up a free Dun & Bradstreet number. As lenders may use this 9-digit number when you apply for a loan. Another key step? Open a business bank account and use it for all your business transactions.

2. Apply for a business credit card

You can often use your personal credit score to get a business credit card, which can make the process easier. Using the card and making regular payments will help build your business credit history. Business credit cards often pay sign up bonuses and rewards on business spending. They're also a good way to separate out your personal and business spending.

Why a Business Credit Card Could Transform Your Small Business

These business credit cards that offer a convenient and efficient way to separate personal and business expenses, simplifying accounting and tax reporting.

Additionally, business cards can provide valuable perks such as rewards points, cashback, and expense tracking tools, enhancing financial management and the potential to help save money in the long run.

Offer	Our Rating	Welcome Offer	Rewards Program	APR
Ink Business Unlimited® Credit Card Apply Now for Ink Business Unlimited® Credit Card On Chase's Secure Website.	Rating image, 4.50 out of 5 stars. 4.50/5 Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. = Best = Excellent = Good = Fair = Poor	Earn $900 bonus cash back Earn $900 bonus cash back after you spend $6,000 on purchases in the first 3 months from account opening.	Earn unlimited 1.5% cash back on every purchase Earn unlimited 1.5% cash back on every purchase made for your business	Intro: 0% Intro APR on Purchases Purchases: 0% Intro APR on Purchases, 12 months Balance Transfers: N/A Regular: 18.49% - 24.49% Variable
Ink Business Cash® Credit Card Apply Now for Ink Business Cash® Credit Card On Chase's Secure Website.	Rating image, 4.50 out of 5 stars. 4.50/5 Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. = Best = Excellent = Good = Fair = Poor	Earn up to $750 bonus cash back Earn $350 when you spend $3,000 on purchases in the first three months and an additional $400 when you spend $6,000 on purchases in the first six months after account opening.	Earn 5% cash back in select business categories Earn 5% cash back on the first $25,000 spent in combined purchases at office supply stores and on internet, cable and phone services each account anniversary year. Earn 2% cash back on the first $25,000 spent in combined purchases at gas stations and restaurants each account anniversary year. Earn 1% cash back on all other card purchases with no limit to the amount you can earn.	Intro: 0% Intro APR on Purchases Purchases: 0% Intro APR on Purchases, 12 months Balance Transfers: N/A Regular: 18.49% - 24.49% Variable
Capital One Spark Cash Plus Apply Now for Capital One Spark Cash Plus On Capital One's Secure Website. Rates & Fees	Rating image, 5.00 out of 5 stars. 5.00/5 Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. = Best = Excellent = Good = Fair = Poor	$2,000 Cash Back $2,000 Cash Back once you spend $30,000 in the first 3 months. Earn an additional $2,000 cash bonus for every $500K spent during the first year	2% - 5% cash back Earn unlimited 2% cash back for your business on purchases, no limits or category restrictions; plus, earn unlimited 5% cash back on hotels and rental cars booked through Capital One Travel.	Intro: Purchases: N/A Balance Transfers: N/A Regular: N/A

Read more: Best business credit cards for no credit.

That said, the interest rate on credit cards is often much higher than a loan or other forms of borrowing, which is why it's advisable to avoid carrying a balance if possible. However, if you're having cash flow issues because someone's late paying their bill or another unexpected issue, it might be the least worst option. 

3. Explore all your options

There are several types of business loans available, including business lines of credit and loans for specific equipment. See whether you qualify for a loan that's backed by the Small Business Administration (SBA) and check out the Consumer Financial Protection Bureau resources. 

Don't rely only on what your bank has to offer. The latest biz2credit report showed alternative lenders had the highest approval rate on small business loans, closely followed by institutional lenders. Small business loan approval rates at big banks slipped to 13.5% in April. 

In addition to the different types of business loans, you might also qualify for a federal or state grant. Grants can involve a lot of paperwork, but they could open doors for your company in terms of cash and support. You'll find a bewildering amount of information online, but Grants.gov and the U.S. Chamber of Commerce are good places to start. 

4. If you get denied credit, find out why

If your loan application is rejected, talk to the lender and ask for the reason. Perhaps your business credit score isn't high enough, you don't have enough collateral, or you haven't been in business for long enough. Once you understand why, you can take steps to address the issue.

Bottom line

It is a challenging time to run a small business. The pressures of inflation have been compounded by high interest rates, and 50% of Goldman Sachs respondents said their profits are lower than before the pandemic. On top of which, if we do hit a recession, it could become even harder to raise capital. If you think you might need to access credit in the next couple of years, the sooner you apply, the better.