December 2024

How to Make Your Travel Tax-Deductible in 2025

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We all know there has been a boom in business and personal travel these last few years. Maximizing tax deductions on these travels can significantly reduce your tax liabilities. 

In general, business travel expense deductions are only available to business owners. However, as you’ll see, this doesn’t mean you don’t qualify.

This post explores the ins and outs of business travel deductions, ensuring you make the most of every business trip.

Business-related travel expenses are deductible

The IRS provides details on business travel tax deductions in IRS publication 463, and the good news is the rules allow a variety of travel expenses to be deducted, including:

• Airplane, train, bus, or car travel between your home and business destinations
• Transportation costs like taxi fares from airports to hotels
• Shipping of baggage and business materials
• Use of a personal car for business purposes
• Lodging and meals (subject to the 50% rule for meals)
• Dry cleaning, laundry, business calls, and tips related to these expenses
• Other similar expenses deemed ordinary and necessary

As with all tax deductions, maintaining detailed records of your expenses is key, including bank and credit card statements and receipts. This basic documentation is vital to substantiate your deduction during an audit. 

Tools like Quicken make this process easy and organized. Just take photos of any documents you need and attach them to their underlying transactions.

Defining a business trip

A trip is considered business related if its primary purpose is business. Again, it’s critical to document the business reasons for your travel, particularly when combining personal activities or family time. The IRS audit guides provide examples of good documentation, including keeping minutes of meetings and maintaining schedules of conferences attended.

Family travel considerations

But what if you bring your family with you? Unfortunately, travel expenses for family members are generally non-deductible unless they’re employees of your business and their travel has a business purpose. If sharing a hotel room, the cost remains fully deductible as there’s no additional expense.

Mixing business with pleasure

When combining business with leisure, like attending a conference in Orlando, separate the expenses. The travel costs for the conference are deductible, but personal activities, like a day at Disney World, are not.

Non-business owners

If you don’t own a business, your tax deduction opportunities for travel are limited. One strategy is to invest in rental properties at popular destinations. Travel expenses for managing these properties, like visiting a rental condo in Orlando for maintenance check-ins or association meetings, are typically deductible.

Engage a tax professional

Tax laws can be complex and vary by individual situation. Consult a tax professional for advice tailored to your specific circumstances, especially for complex travel deduction scenarios.

Conclusion

Understanding and utilizing business travel deductions is a smart strategy for reducing tax liabilities. Always prioritize accurate documentation and stay informed about IRS guidelines. By doing so, you ensure that your business travel is not only productive but also financially savvy. 

Remember, every journey offers opportunities, not just for business growth but also for tax savings. Plan your trips wisely, document meticulously, and consult professionals as needed to fully leverage the tax benefits of business travel.

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Step-by-Step Guide to Recording Transactions in a Journal

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One of the keys to a successful business is having accurate financial records. The foundation of your business depends on it. Understanding how to record transactions in a journal is not just an important accounting task: it’s a skill that helps you manage your finances with confidence.

In accounting, journal entries document every transaction in your business, ensuring that nothing slips through the cracks. By keeping your books up to date, you’ll set yourself up to monitor cash flow, track expenses, and protect your company’s financial health.

This is your step-by-step guide to mastering the art and science of journal entries. It lays out the double-entry accounting system, explains debit and credit, and walks you step by step through the process of creating clear and accurate journal entries.

Understanding journal entries

Journal entries form the basis of your financial accountability. Using the double-entry bookkeeping method, you’ll record every financial action twice: once as a debit and once as a credit. 

This approach ensures an organized record that reflects the core accounting equation: 

Assets = Liabilities + Equity

What makes up a journal entry?

• Date: Marks when the transaction occurred.
• Description: Provides details about what the transaction involves.
• Reference number: Assigns a unique identifier for tracking purposes.

The double-entry accounting system

This is a method that makes sure every financial transaction is recorded in at least two different accounts, maintaining the accounting equation’s balance: Assets = Liabilities + Equity. 

Here’s how it connects to the general journal and ledger:

All transactions are posted in the journal in chronological order:

1. Every entry is recorded as a debit in one account.
2. A corresponding credit is made in another account.

These transactions are then posted to the ledger, grouped by account:

• The entries from the journal are then posted to the general ledger, where all credits and debits are tallied.

Debits and credits explained

T-accounts, also known as ledger accounts, are representations of individual accounts that are important for recording and visualizing debits and credits. Each T-account resembles the letter “T” when it’s drawn on paper and records the changes of a particular ledger account.

For every financial transaction there are two sides to consider: a debit entry and a credit entry. 

Here’s a simplified guide to their relationship:

• Assets and expense accounts:
  • Increase with a debit entry (left side of the T-account)
  • Decrease with a credit entry (right side of the T-account)
• Liabilities, equity, and revenue accounts:
  • Increase with a credit entry (right side of the T-account)
  • Decrease with a debit entry (left side of the T-account)

Overview of account types

In accounting, all business transactions are recorded in specific types of accounts. Each account type is important because it categorizes every financial activity of a business. 

There are five essential account types:

1. Asset accounts: These include resources owned by the company that have value, such as cash, inventory, and equipment. Assets are expected to provide future benefits to the business and help to build the financial foundation of the company.
2. Liability accounts: These record what the company owes to others — debts and obligations like loans, accounts payable, and mortgages.
3. Equity accounts: Reflect the owner’s claims to the business resources after liabilities are paid off. This includes the owner’s capital, retained earnings, and stock.
4. Revenue accounts: These are accounts related to the income the business earns from sales, services, or both.
5. Expense accounts: These represent the money spent or costs incurred in a company’s effort to generate revenue. This can range from utility bills to office supply expenses.

These accounts form the backbone of a company’s financial statements, impacting business decisions and financial health assessments.

Keep in mind that employing short and precise bookkeeping in these accounts is not just a regulatory requirement — it’s a way to keep a clear financial picture, promoting informed decision-making and long-term business success.

The process of creating a journal entry

By recording each business transaction, you set up your business financials for success and transparency. Recorded transactions provide the details you need for all financial reporting and analysis. 

Let’s walk through the steps of accurately documenting your company’s fiscal activities.

Step 1: Gather relevant documentation

Every financial transaction has a supporting document or digital record that serves as proof — be it a sales receipt, invoice, bank statement, or payroll record. Your first step should be to collect these documents and put them in a safe place. 

Step 2: Analyze the transaction

With your documentation at the ready, you should then analyze the nature of the transaction. You’ll need to identify which accounts are affected and determine whether those accounts should be debited or credited. 

Step 3: Record the debit and credit

Enter the transaction into the journal by posting the appropriate debit and credit amounts to the correct accounts. Remember the basic rules: assets and expenses are increased by debits and decreased by credits, while liabilities, equity, and revenues go the opposite way. 

Step 4: Include a description of the transaction

For each journal entry, include a clear and concise description of the transaction. This practice ties the numbers back to the business activity, creating a path back to the source. It’s practical and aids in future reviews or audits in which you may need to explain the nature of each transaction.

Examples of common journal entries

Below are common types of journal entries that you might encounter:

1. Sales: When a company makes a sale, it records a debit entry in the Accounts Receivable account and a credit entry in the Revenue account. This reflects the increase in receivables and sales revenue accordingly.
2. Purchases: For purchases, especially on credit, the purchase or expense account is debited and Accounts Payable is credited, indicating an incurred expense and a liability to pay in the future.
3. Cash receipts: Upon receiving cash, the Cash account is debited, reflecting the increase in the asset. The corresponding credit entry could be to Accounts Receivable, for example, signaling that an open account has been settled.
4. Payment of expenses: When an expense is paid, like an office supply purchase, it entails a debit entry in the expense account and a credit to Cash or Accounts Payable, decreasing the cash or liability, respectively.

Common mistakes to avoid

In bookkeeping, small errors can turn into urgent financial issues. One common problem is mixing up the debit and credit columns. Always remember — the debit side increases assets and expenses, and the credit side increases liabilities, equity, and revenue.

Another frequent issue is choosing not to record smaller transactions. No matter how small an expense or transaction may seem, every penny must be accounted for. Overlooking the occasional office supply purchase or minor cash receipt will skew your financial statements.

Data entry errors can also plague even the most attentive bookkeeper. Always double-check your entries and validate them against source documents, like receipts or invoices. It’s important to avoid making assumptions about transactions — if something is unclear, seek clarification before committing to the record.

Tips for accurate recordkeeping

To hone your bookkeeping proficiency and maintain precise records, consider these tips:

1. Stay organized by keeping documentation in order and categorizing transactions as you go. Modern accounting software like Quicken can be invaluable in managing and automating this process.
2. Take the time to understand the nature of each transaction. Does it involve accounts payable, receivables, asset accounts, or expense accounts? You’ll need to fully understand the transaction to make sure you’re recording it correctly.
3. Embrace the power of technology. Use accounting software like Quicken to prevent manual errors and streamline the recording process. Features like automatic calculations and syncing with bank records can be lifesavers.
4. Regularly schedule internal audits to ensure entries are complete and conform to accounting standards. This practice can also detect problems that might suggest errors or misconduct.
5. Invest in training. Being familiar with current accounting principles and software features can make a significant difference in the quality of your bookkeeping. 

By ensuring these best practices, you can sidestep common mistakes and keep your finances in order. 

Professional-level journal management is not just about compliance: it’s about gaining control over your business’s financial health and making informed decisions that foster stable growth.

The role of accounting software

Accounting software like Quicken Classic Business & Personal makes the task of manual journal entry in bookkeeping much easier and more efficient. By automating key aspects of the accounting cycle, it plays a pivotal role in recording financial transactions quickly and accurately. 

Key features:

• Chronological order: Transactions are automatically dated, keeping records organized.
• Reference numbers: Each entry is tagged with a unique identifier, simplifying future audits and reviews.
• Automatic syncing: The software can connect to financial institutions such as banks and credit cards to import transaction data automatically, avoiding the possibility of errors introduced during manual data entry.
• Automatic calculations: The software computes totals, reducing the risk of calculation errors.

Quicken integrates financial accounting processes, from accounts payable and receivable to automated financial statements. It simplifies complex tasks such as reconciling expense accounts, tracking receipts, and ensuring the accuracy of financial reports. 

It also ensures adherence to the double-entry accounting method, maintaining the integrity of the accounting equation — a keystone of accurate financial reporting. 

Maintaining up-to-date financial records

Accurate financial records are the bedrock of sound business management. These records influence how businesses track payables and receivables, manage cash flow, and measure financial performance. 

Maintaining up-to-date financial records involves tracking and documenting all your financial transactions to ensure the accuracy of your accounting data. The records should clearly reflect your business’s financial health and support the preparation of financial statements, which are vital for informed decision-making.

Whether you use traditional ledger books or modern software, the principle remains the same: updated and accurate financial records are the backbone of your business’s financial integrity.

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Your 2025 Guide to Small Business Expense Tracking

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Tracking expenses might seem like a hassle, but it’s one of the smartest habits you can build for your business. When you avoid surprises at tax time and make better decisions for growth, your small business seems to run effortlessly.

In this guide, we’ll explain what business expenses are, why they matter, and how to track them step by step. By the end, you’ll have a simple system to keep your finances in check without the stress.

What are business expenses and why do they matter?

Business expenses are the costs of keeping your business running — things like office supplies, electricity, software, and advertising. 

To be deductible, the IRS says these expenses must be both ordinary (common in your industry) and necessary (helpful for your business).

For example, buying paper for your office printer would count as an ordinary and necessary expense. On the other hand, extravagant or personal purchases, like a luxury vacation labeled as a “business trip,” typically wouldn’t be acceptable.

If you’re unsure whether something qualifies, ask yourself:

• Does this expense directly benefit my business?
• Is it reasonable compared to similar practices in my industry?

Tracking these expenses gives you a clear view of where your money is going. It helps you manage cash flow and avoid surprises, so you’re always in control.

Tax season is another big reason to track your expenses. Organized records let you claim deductions without last-minute stress.

Most importantly, expense tracking helps you make informed decisions. You’ll see where to cut costs and where to invest your resources, setting your business up for success.

Examples of business expenses common to small businesses

Small businesses often face a variety of expenses, many of which are deductible if they meet IRS rules. Keep organized records to ensure you’re claiming everything you’re entitled to and managing your finances effectively.

Here are some common examples. 

Home office costs

If you work from home, you can deduct part of your rent or mortgage, utilities, and maintenance costs related to your office space.

Office supplies

This includes items like paper, pens, and other office supplies needed for your work.

Marketing and advertising

Expenses like building a website, running ads, printing business cards, or managing social media fall into this category.

Professional services

Legal advice, accounting help, and hiring consultants or freelancers all count as business expenses.

Travel and transportation

Travel to meet clients or attend events, including mileage, airfare, lodging, and meals should all be tracked — remember to keep receipts for your accountant.

Education and training

Workshops, certifications, and online courses that improve your skills or keep you up to date in your field are valid expenses.

Insurance

Business-related policies like liability insurance or health insurance for self-employed individuals are generally deductible.

Communication

Phone and internet services used for your business can qualify as expenses, especially if you have separate cellular plans for work.

What do business expenses have to do with your taxes?

The IRS allows businesses to deduct ordinary and necessary expenses from their taxable income. This means that tracking and reporting your expenses accurately can lower your tax bill.

For example, costs like office supplies or professional services are typically deductible. To claim these deductions, the IRS requires detailed records that prove the expenses are legitimate.

Good record-keeping also protects you in case of an audit. If the IRS reviews your return, having organized and complete records ensures you’re ready to defend your claims.

If you don’t track your expenses properly, you risk missing out on deductions, paying higher taxes, or even facing penalties. Accurate tracking saves you money and keeps your business compliant.

7 tips for tracking your small business expenses

Managing your expenses doesn’t have to be overwhelming. These seven tips will help you stay organized and keep your finances in check.

1. Use a dedicated business bank account and credit card

Separate your business and personal finances by opening a business bank account and credit card. This makes it easier to track transactions, simplifies bookkeeping, and adds a layer of professionalism. It also protects your personal assets if your business is structured as an LLC or corporation. 

Set these accounts up early to keep everything organized.

2. Invest in accounting software

Good tools make a big difference. Accounting software can save you time and reduce errors by automating tasks like importing transactions, categorizing expenses, and generating reports. Many tools also give you real-time insights into your cash flow. 

3. Categorize expenses consistently

Organizing your expenses into clear categories helps you see spending patterns and simplifies tax prep. Common categories include rent, utilities, supplies, travel, advertising, and professional services. Use the same categories throughout the year to keep things consistent.

4. Create and track a budget for your business

Setting a budget helps you control spending, plan for growth, and evaluate your performance. By reviewing your budget regularly, you can adjust as needed to stay on track and make the best use of your resources.

5. Use digital tools for invoices and receipts

Paper receipts can get lost or damaged, so switch to digital tools. Apps let you snap photos on your phone and store receipts in the cloud, keeping them organized and easy to find when you need them. Digital records also reduce clutter and make audits less stressful.

6. Keep your data up to date

Record expenses as they happen. Waiting too long can lead to forgotten details and backlogs. Make it a habit to update your records at least once a week. Staying on top of your data gives you an accurate picture of your financial health and reduces stress at tax time.

7. Reconcile bank statements every month

Compare your records to your bank statements monthly to ensure everything matches. This helps you catch errors, resolve discrepancies, and maintain accurate books. Regular reconciliation keeps your finances in good shape and prevents bigger issues down the line.

By following these tips, you’ll simplify expense tracking, stay organized, and set your business up for financial success.

Identifying and fixing common challenges

Even with the best intentions, small businesses often run into issues when tracking expenses. Tackling these challenges early can save time and money.

Challenge 1: Mixing personal and business expenses

The problem: Combining personal and business expenses leads to confusion, messy records, and potential legal trouble.

The solution: Use separate bank accounts and credit cards for your business. Commit to keeping all personal transactions out of your business accounts. If you accidentally mix them, document the transaction and reimburse the appropriate account. Regularly reviewing your statements helps ensure everything stays in its place.

Challenge 2: Losing or misplacing receipts

The problem: Misplaced or undocumented receipts make it hard to claim deductions and can create headaches during audits.

The solution: Set up a system for capturing receipts immediately. Use digital tools to scan and store them as you receive them. Organize receipts by category and date, so they’re easy to find when needed. The key is to stay consistent — don’t let receipts pile up.

Challenge 3: Procrastinating on bookkeeping

The problem: Putting off bookkeeping creates a backlog, increases the chance of errors, and adds stress at tax time.

The solution: Schedule a regular time to update your records. Whether it’s daily, weekly, or bi-weekly, make bookkeeping a habit. If you’re short on time, consider hiring a professional bookkeeper to keep things on track. Staying proactive prevents small tasks from turning into big problems.

Streamline your small business expense tracking with Quicken

Quicken lets you manage your business and personal expenses in one convenient place while keeping them separate — automatically.

It’s one app for one low price that covers all your financial management needs.

• Download transactions and categorize them automatically
• See a clear picture of your income, expenses, and cash flow
• Get built-in reports for deductions and tax preparation
• Set financial goals and monitor your progress

FAQs about small business expense tracking

What does an expense report look like?

An expense report is a detailed summary of business spending over a certain time frame. It typically includes the date of each expense, its purpose or description, the amount spent, the category it falls under, and supporting documents like receipts. 

These reports are vital for tracking spending, reimbursing employees, and ensuring you have proper documentation for tax purposes.

Can regular expense tracking benefit my business beyond tax preparation?

Yes, consistent business expense tracking has benefits that go beyond taxes. It helps you manage cash flow by giving you a clear picture of your spending, highlights cost-saving opportunities, and improves profitability by controlling unnecessary expenses. 

Additionally, accurate financial data supports strategic planning, helping you make informed decisions for growth and investments.

Is it necessary to keep receipts for all business expenses, and how long should I store them?

Yes, it’s important to keep receipts for your business expenses because if you’re ever audited, you’ll need to be able to prove the expenses you claimed. IRS guidelines change from time to time, so it’s best to read the most up-to-date information about recordkeeping rules on the IRS website.

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How to Build Business Credit — 9 Steps to a Great Business Credit Score

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Whether you’re in the early stages of building a business or you’re at a point where you could use more funding, building your business credit score can unlock your company’s potential.

Here’s everything you need to know to make it happen.

What is business credit?

Business credit represents your company’s ability to borrow money or acquire financing. It’s similar to personal credit but specifically linked to your business instead of your personal finances. 

Your company’s credit score is used by lenders, suppliers, or other potential partners to assess the potential risk of working with you.

If a bank loans your business money, how likely are you to pay that loan back in full? A higher business credit score means your business is more likely to manage any new credit responsibly.

Why does a good business credit score matter?

A good business credit score shows the world (or at least lenders) that your business is doing well and can be trusted. This helps you access the funds you need when you need them, for things like buying new inventory or equipment. 

Sometimes, in the act of doing business, we have to pay for things to do the job before we receive any money from a client. So there’s a gap between the time the cash goes out and the time the cash comes in — credit can help you bridge that gap, giving you a way to pay for things until that money comes in.

Also, like getting a discount at a store you often buy from, you can get better interest rates & terms on loans and credit cards. 

What’s a good business credit score — and where can you see yours?

A good business score depends on where you look. Several major credit bureaus report credit scores for businesses, and each one uses a different scale.

Let’s walk through them.

Who reports business credit scores?

There are four main places you could get your business credit score: 

1. Experian’s Intelliscore Plus — Scores from 1 to 100. The higher the score, the better.
2. Dun & Bradstreet PAYDEX Score — Same as Experian
3. Equifax’s Small Business Credit Risk Score for Financial Services — Uses a rating system that ranks scores from 101 to 992.
4. FICO’s small and medium enterprise (SME) scores — Scores run from 0 to 300.

How business credit scores are calculated

Different agencies use different methods, but the core elements they focus on don’t change a whole lot from one to the other.

Here’s a breakdown of the main factors that affect business credit scores.

Payment history

The most significant factor for business credit is how good your business is at paying its bills on time and in full — whether that’s loans, credit cards, or trade accounts. If you’ve been paying all your bills on time, it’s much more likely that you’ll pay any new bills or loan payments on time too.

Credit utilization

This refers to how much of your available credit you’re using. If you’re close to maxing out your business credit cards, that might mean your company is in financial trouble. If you’re well under your limit, that’s more likely to be a sign of financial health.

Keeping your credit utilization low — ideally below 30% — is considered good practice.

Debt-to-income ratio and outstanding balances

The amount of outstanding debt your business has matters, especially in relation to how much revenue you’re bringing in. A company that brings in $1M per year can generally carry a lot more debt than one that’s bringing in $60,000.

If you have a lot of outstanding debt compared to your revenue, your business could struggle to pay back any additional debt.

Length of credit history

The longer your business has been around and responsibly using credit, the better. Lenders like to see a track record that proves you’ve managed your finances well for a long time.

A newer business will have less credit history, but they can build business credit with tools like secured lines of credit or equipment loans that are often easier to get than other forms of financing.

Public Records

Business credit bureaus also consider any negative public records about your business, such as bankruptcies, tax liens, or judgments. These items tend to hurt your score a good bit if you have any.

Industry risk

The type of business you’re in can also influence your score. Some industries are considered riskier than others, so if you’re in a tough industry, that could bring your score down a bit.

Still, it’s not as big a factor as the ones listed above.

Company size and revenue

Larger companies or those with higher revenues may be viewed as less risky. This isn’t necessarily a direct part of the score calculation, but it’s often used by lenders when deciding whether to extend credit to a company that’s requesting it — like for a loan or new credit card.

Steps to build business credit

Like with personal credit, there are a few things you can do consistently to ensure you get recognition for your good business practices, such as paying on time and strengthening your credit history.

Let’s walk through them.

Step 1. Establish your business entity

First, ensure your business is legit! Register your business and obtain the necessary state and local licenses to operate. You want to make sure everything about your business is legal and that you’re operating with the proper approvals from state and federal officials.

This is also a great time to put together a business plan. Potential lenders will want to look at your goals, your business’s practices, how you plan to grow, and how you’ll use their financial support practically and responsibly. A strong plan shows that you mean business — literally!

Step 2. Obtain an EIN (Employer Identification Number)

After registration, you can go online and apply for an Employer Identification Number (EIN). This is essentially just a social security number but for your business.  It works as a tax reporting number so it’s important for your business credit.

Be sure to use the official link through the IRS. It’s free.

Step 3. Open a dedicated business bank account

With your EIN in place, it’s time to set up a secure bank account for your business. It’s important to keep your personal financial records separate from your business records since it’ll help when you’re reporting back to the IRS. Plus, a dedicated business account helps with keeping an eye on your business’s cash flow and preserves its financial credibility.

Step 4. Get a D-U-N-S^® number

The role of Dun & Bradstreet

Let’s talk a little bit about Dun & Bradstreet and its role in business credit. Like Experian and Equifax, they collect information about how consistently companies pay their bills and how well they’re doing financially. Lenders and other businesses look you up by your D-U-N-S number to decide if they should lend money or do business with a company.

Obtaining a D-U-N-S^® Number

• There are four simple steps to getting a D-U-N-S number:
  1. Check if you already have one: Go to the Dun & Bradstreet website and search for your business.
  2. Gather your information: Submit your business name, address, phone number, and other details. Your business details need to be in the public record, so if you’re a new LLC, you may have to wait a couple of weeks for your company to show up online.
  3. Apply online or by phone: Fill out the application on the Dun & Bradstreet website or call their number.
  4. Wait for your number: It usually takes a few days to get your D-U-N-S number.
• When you receive your D-U-N-S number, pay attention to your Duns & Bradstreet Paydex score. It shows how well your business pays its bills on time and assesses your reliability overall.

Step 5. Build business relationships with vendors

What trade credit is and how it affects your business credit score

Trade credit is like borrowing money from a vendor or supplier to buy something you need for your business and paying it back later. It’s a way for businesses to get things they need without paying cash upfront.

Trade lines work as a record of these borrowing agreements. They show how well a business pays its bills on time. It’s important to get these trade lines reported to the various bureaus.

How to establish trade credit and the importance of paying on time

Paying your trade credit bills on time helps build good business credit. It’s like proving to lenders that you’re responsible with money. So, using trade credit wisely can improve your business’s financial reputation and improve creditworthiness.

Step 6. Use business credit cards

How a credit card can help you build business credit

A business credit card is an awesome tool not only to get needed funds for your business but to also prove credit history and utilization. Timely payments can show your lenders that you can take care of your credit responsibly. To start, you can test out a secured credit card where you make a small deposit and borrow against those funds. This helps in developing a sense of how well (or not!) you spend your money, and how resourceful you are with credit when it comes to your business.

Business credit card options when you’re a new business owner

You should know that getting a business credit card may not be easy — banks want people to be in business for a while. For this reason, your first business credit card may be secured.

My first business credit card was secured. All I did was put $5,000 in an interest-bearing savings account, and I was given a card with a $5,000 credit limit, which I religiously paid off every month. After a year, they increased my limit without me having to increase my savings. I still have a high-dollar credit card with that bank, even if they’ve long since given me my initial deposit back.

Pro tip: Use these cards as tools to build credit, not as an excuse to spend thousands of dollars. Repay your credit debt on time but consider carrying over smaller balances. This helps to boost your credit score while maintaining a reliable and seasoned credit history. 

Step 7. Consider a business loan or line of credit

Types of business loans

There are three basic loans available to small businesses:

• SBA loans: Loans are backed by the government, making them easier to get for small businesses. They offer various types of loans for different needs like starting up, expanding, or buying equipment for your locations.
• Term loans: A lump sum of money you borrow from a bank or lender and pay back in installments over a fixed period of time. These are the most common loans and are good for big purchases like equipment or real estate.
• Lines of credit: A borrowing limit. You can borrow money up to that limit as needed and pay it back as you go. It’s great for managing cash flow and unexpected expenses, such as needing to buy a new software tool or hardware to complete a job. 

Qualifying for a loan

Lenders look at a few key things when deciding to give your business a loan:

1. Your business’s financial health: The banks and lenders analyze things like your income, expenses, and profits to make sure your business can handle the loan and you operate with fiscal confidence.
2. Your business credit score: This shows the banks how well you pay your bills.
3. Your business plan: Have a business plan ready to show banks how you’ll use the money they give you and your means of making it back.
4. Your personal credit score: Lenders may look at your personal credit, especially for small businesses.

Step 8. Monitor business credit reports

Understanding credit reports

Your business’s credit report looks at: 

• Payment history: How well your business pays its bills on time. 
• Credit utilization: How much of your available credit you’re using. 
• Public records:  How your public trust and reputation stand, looking into any lawsuits, bankruptcies, or liens against your business. 

Checking your credit regularly

Stay on top of your business credit reports so you can address any problems immediately. Use a trusted service to help you explore new credit opportunities and check your scores consistently.

If you find an issue on your credit report, do this:

1. Gather evidence: Collect documents that support your dispute, such as receipts, payment confirmations, or court records.
2. Contact the credit bureau: Submit a dispute letter to the credit bureau that outlines the erroneous or problematic information. Include your business details, account numbers, and a clear explanation of the error.
3. Follow up: Wait for the credit bureau’s investigation. If the error isn’t corrected, you can dispute it again or contact the original creditor.
4. Add a dispute statement: You can ask the credit bureau to add a statement explaining your dispute to your credit report.

Step 9. Maintain strong financial management

Accurate record keeping

Never underestimate the power of consistent and accurate business records. Remember, “if it’s not written down, it doesn’t exist!” Don’t wait until you get audited by the IRS to realize your records are woefully slim or incorrect.

Cash flow management

Using business credit cards and lines of credit strategically can help improve the cash flow of your business. If you use credit as a tool and buy things that are needed at the right time, such as the beginning of a project, by the time the client pays, you can pay off high credit balances and not incur more interest.

Keeping your business credit separate from your personal credit

Building business credit is not the same as building personal credit — you’re building credit for your business, which is seen as a separate entity. You should always keep your business finances separate from your personal, making sure you have separate accounts for each.

Business credit vs. personal credit

Imagine business is like going to school.

Business credit is like a report card for your company. It shows how well your business handles the money coming in and going out. 

Unlike your personal credit score, which is about you, your business credit score is about your company’s financial health. Building good business credit helps you get loans and better deals, allowing for flexibility and improved options when it comes to your financial dealings. 

Does business credit go on your personal credit?

Usually, your business credit doesn’t affect your personal credit. But, if you personally guarantee a business loan, your personal credit could be on the line if your business can’t pay. 

While your personal credit might be looked at when you start a business, it shouldn’t heavily influence your business credit over time. 

Final thoughts

Building business credit takes time and consistency. Pay off high balances on time. Keep accurate records. Check your credit reports regularly.

If you feel overwhelmed, it may be time to hire some help, like a bookkeeper, accountant, or business credit specialist. 

The Small Business Administration (SBA) may even be able to help. They have resources and people ready to help you when you need them.

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