How To Build Business Credit in Canada: A Comprehensive Guide

Building business credit in Canada is crucial for entrepreneurs looking to grow their ventures. Whether you’re a startup or an established company, a strong corporate credit score can open doors to better financing options and business opportunities.

What is business credit?

It’s when a business is able to purchase goods and services and pay for them at a later date. You can build business credit over time by maintaining a solid track record of financial wellness in your company. When you have a strong credit rating, it becomes easier for a company to borrow money when they need it.

Why Business Credit Matters?

Building business credit is crucial for several reasons, supported by concrete statistics that highlight its impact on business operations and growth:

  1. Access to Funding: A strong business credit profile significantly improves a company’s chances of obtaining financing. According to the U.S. Small Business Administration (SBA), 27% of businesses reported they could not receive the funding they needed, which can be detrimental to growth and sustainability​ (SBA.gov)​. Businesses with established credit are 41% more likely to be approved for bank loans​ (Nav)​.
  2. Cost Savings: Good business credit can lead to lower interest rates on loans and better terms with suppliers. This translates to substantial savings over time. For instance, businesses with strong credit ratings often receive lower interest rates on loans, which can save thousands of dollars annually compared to those with weaker credit profiles​ (Nav)​.
  3. Cash Flow Management: Effective cash flow management is directly linked to business credit. Businesses that manage their cash flow well can maintain on-time payments, positively impacting their credit scores. Late payments can hurt credit scores, making it harder and more expensive to obtain credit in the future​ (Nav)​.
  4. Growth Opportunities: Access to credit allows businesses to invest in expansion opportunities. Whether it’s hiring more staff, purchasing inventory, or expanding facilities, credit availability can be a crucial factor in supporting business growth. According to Nav, nearly 73% of small firms used financing in the past 12 months to support their operations and growth​ (Nav)​.
  5. Business Survival and Success: Statistics show that businesses with better access to credit have higher survival rates. The SBA notes that almost 80% of businesses that started in 2014 survived until 2015, highlighting the importance of financial stability in the early stages​ (Nav)​.

By understanding and building business credit, companies can ensure they have the financial resources needed to support operations, manage cash flow effectively, and seize growth opportunities. For more detailed information, you can refer to resources from the U.S. Small Business Administration and Nav.

Steps to Build Business Credit in Canada

1. Establish Your Business Structure

To start building business credit, you need a proper business structure:

  • Register your business
  • Get a business number from the CRA
  • Open a business bank account

2. Apply for a Business Credit Card like Float

A business credit card is often the first step in establishing a credit history:

  • Choose a card that reports to business credit bureaus
  • Use it regularly for business expenses
  • Pay the balance in full each month

3. Work with Suppliers and Vendors

Building relationships with suppliers can help improve your business credit:

  • Set up trade credit accounts
  • Pay invoices on time or early
  • Ask suppliers to report your payments to credit bureaus

4. Monitor Your Business Credit Score

Keeping an eye on your corporate credit score is crucial:

  • Check your score regularly
  • Dispute any errors promptly
  • Understand what factors influence your score

5. Maintain Good Financial Habits

Consistency is key when it comes to improving business credit:

  • Pay all bills on time
  • Keep debt levels low
  • Maintain a positive cash flow

Common Mistakes to Avoid

When building business credit in Canada, steer clear of these pitfalls:

  • Mixing personal and business finances
  • Applying for too much credit too quickly
  • Ignoring errors on your credit report

FAQs

Q: How long does it take to build business credit in Canada? A: It typically takes 2-3 years to establish a solid business credit history.

Q: Can I build business credit without a business credit card? A: Yes, through trade credit with suppliers and other forms of business loans.

Q: How often should I check my business credit score? A: It’s recommended to check your score at least quarterly.

Q: Does my personal credit affect my business credit? A: For new businesses, personal credit may be considered, but established businesses are evaluated separately.

Q: If getting credit is so hard for a business, why not use your personal card? A: As a small business owner, separating your business credit from personal credit is key. When you use your personal card for business purchases, you’re actually missing out on an opportunity to build business credit. 💳  It also blurs the lines between business and personal expenses, which can be a big headache for your finance team during tax season.

In Conclusion: Building Business Credit is Important

Building business credit in Canada takes time and effort, but the benefits are well worth it. By following these steps and maintaining good financial habits, you can improve your business credit score and open up new opportunities for your company’s growth and success.

Float is Canada’s only all-in-one corporate cards, reimbursements, and bill pay platform that helps customers:

  • Earn cashback on all categories and save on FX
  • Generate 4% interest on funds held with Float
  • Eliminate expense reports and receipt chasing
  • Close the books 5x faster at the month-end

Want to learn how companies like Clutch, Neo, Knix, and 1,000s of other Canadian businesses on average save 7% of their monthly spend with Float? Get started with Float today by clicking the button below!

Want to learn more before singing up? Book a demo today to learn more about the product from our team!

Giving Clutch a Better Way to Spend

We sat down with Ben, the Finance Manager at Clutch, Canada’s first online car-buying and vehicle trade-in platform, to discuss the company’s experience with Float. In 2022, Clutch’s finance team is leading with a mantra to “simplify and automate” with a company-wide goal to service up to 90% of Canadians in 2023 – and Float is helping them do just that. Here’s what Ben had to share about Clutch’s experience with Float.

Q: How long have you been using Float and why did you choose us?

“When I first joined Clutch, our credit card reconciliation process was extremely frustrating and time consuming. Today with Float, we’re on a 5-day close schedule at month end and can report to our execs in just 5 business days.”

We’ve been using Float since June 2021. Before, our team was using software that lacked efficiency and never really gave us a strong receipt management tool to reconcile our books. We were also limited to only 15 credit cards across the company or otherwise would incur additional fees. One thing about accounting in the automotive industry is that it’s very labour-intensive. It comes with a lot of invoices, P.Os and manual data entries and transactions, and at the rate we’re growing, it can easily get out of hand. By choosing Float, we’re able to quickly issue an unlimited number of cards to our growing base of employees. Out of 200 employees, 120 were able to get Float cards – everyone who needs a card now has one. This has really helped our day-to-day operations as it’s given our employees greater autonomy to spend and make decisions.

Q: What were the biggest pain points that Float solved for your business?

“Float gave us the final source of truth to reconcile our accounting and it only takes 5 minutes – whereas before it took the whole day.”

From an accounting perspective, Float has made our lives a whole lot easier. Before, employees were uploading receipts in group chats and the accounting team would manually punch them in at month end. We had a 10%-to-15% margin of error and oftentimes didn’t even have the right receipts. Today with Float, we’re able to get a clear snapshot of all transactions made in real time and have seen a significant decrease in errors. Employees are also empowered to upload receipts all on their own and provide descriptions of transactions, while accounting is able to track everything and identify any discrepancies. 

“Being able to put accountability on spenders to attach receipts to specific transactions made our expense management a whole lot easier.”

A great thing about Float is that we can now keep up with our credit card transactions on a day-to-day basis. We’re able to download easily digestible reports with all the information we need and it’s all integrated within our external systems. Before, our accounting team would spend the entire day reconciling all of our credit cards. Just eight months ago, we were operating at a tenth of the scale that we’re operating now. If we were to continue under our old process, we would have to hire additional people to handle this. Obviously that’s not efficient and scalable – which is exactly why we turned to Float.

Q: What was the best part about working with Float?

Fast & easy onboarding

It only took a few days to familiarize ourselves with the software. After that, we were able to hit the ground running and get everyone set up with a Float card. It really didn’t feel like we lost a whole lot of time, and we quickly made up for the time spent on implementation just from the efficiency we gained.

Enhanced the platform based on our needs

Float took our feedback in stride and used it in their next product launch. There were a few unique things that we wanted to see in our credit card platform and they were on it right away. One thing we really wanted was a mass download receipt option so that we didn’t have to manually input 3,000 transactions a month. When Float added this simple button to the platform, it easily saved us 20 hours over the course of a month.

Q: How has Float helped your business scale and grow?

With our previous provider, we only had 15 credit cards, which wasn’t sustainable at the rate we were growing. Giving new employees access to a company credit card with no spending limit obviously subjected us to a lot of risk. Being able to issue Float cards to employees with specific limits and having the flexibility to adjust them, reduces our risk exposure significantly and allows us to better track how money is being spent in the company.

There’s so much movement in our production facilities every single day, we needed the agility of a credit card that the right people could access – which is exactly what Float provided. We would not have been able to keep up with the level of Clutch’s scale growth in 2021 without Float.

About Clutch

Clutch is on a mission to reinvent the way Canadians buy and sell cars. Founded in 2016, Clutch’s vertically-integrated business model is modernizing the auto market, giving customers a smarter and easier alternative – all through the click of a button. 

If you’re quickly scaling or looking to automate and improve the way your company spends, book a demo with our team to learn more!

About Float

Float is Canada’s only all-in-one corporate cards, reimbursements, and bill pay platform that helps customers:

  • Earn cashback on all categories and save on FX
  • Generate 4% interest on funds held with Float
  • Eliminate expense reports and receipt chasing
  • Close the books 5x faster at the month-end

Want to learn how companies like Clutch, Neo, Knix, and 1,000s of other Canadian businesses on average save 7% of their monthly spend with Float? Get started with Float today by clicking the button below!

Want to learn more before singing up? Book a demo today to learn more about the product from our team!

A Few Ways To Show Some Love To Your Finance Team

Your finance team is focused on managing corporate spend, budgets and receipts on a daily basis. They are the fuel that keeps the company running smoothly and one of the most important departments in the fold. And, if you’re a new startup, it may just be that one special person who takes care of it all. 💸 🙋🏼‍♂️
If your finance team or accountant looks like they’re running on empty, here’s how you can show them some extra TLC this month. 💙

A simple ‘thank you’ goes a long way 🥰

Post a sticky note on their desk, send them a Slack message or write up a quick email expressing how appreciative you are for their hard work. 🙏🏽   Even the smallest of gestures can make a big difference.

Get on their good side. Submit receipts on time. 🧾

There’s nothing your finance team dreams of more than a stress-free month-end. ✅  One way to make their lives easier is by staying organized and submitting your receipts on time. This will save your finance department all of the stress and headaches they often endure while having to chase employees down for those last minute receipts. 🏃🏼‍♀️

Send them a sweet treat 🍦

See where you can extend your corporate budget and send a well-deserved treat to your finance team. Whether it’s some much-needed caffeine or a team lunch, the best way to anyone’s is through their stomach.🍕 🥗 ☕️

Win their heart with Float 💘

This will be love at first sight. 😍  Float’s platform simplifies and automates the entire spend management process that will make any finance team fall in love…fast.

  • All expenses are organized and tracked in real time, all in one place 👍🏼
  • Save time and say goodbye to expense reports 🎉
  • Easily issue corporate cards to any employee who needs one 💳
  • Gain greater visibility into company and team spending 👀
  • Employees are notified to submit receipts after every business purchase 🧾

Diffuse month-end anxiety and show your finance team some love with Float. Book a demo with Float today. Your accountant will love you for it. 😍

Why You Need a Better Way to Track Employee Receipts

Keeping up with your corporate expenses can be a total nightmare but it doesn’t have to be. In fact, 15% of all Canadian SMEs have found tracking expenses and reconciling their books to be a major challenge. If your team is growing, there’s a good chance your expenses are too, which means getting a handle on your expense management is key. Finding a better way to track and manage corporate spending can save you thousands of dollars a year – and we’re here to let you in on the solution. 

It pays to keep track.

Canada Revenue Agency requires Canadian businesses to keep records of all transactions to support their income and corporate expense claims. Companies can claim tax deductions on expenses, but only if they have a valid proof of purchase and can prove it was a business expense. How can they do this? 🤔  By providing a receipt. 🧾  
If your corporate receipts aren’t organized or properly submitted, you won’t be able to use these expenses as a tax reduction, which means less money back in your pocket come tax season. That’s why companies need to invest in the proper tools to enable managers to easily collect and record receipts from employees all year round. This will help them easily track their expenses and have a better picture of where their money is going, who is spending it and why. When it comes time to file taxes, you’ll feel like a major weight is lifted off your shoulder!

Automate & Celebrate! 🤩

Let those piles of receipts and chasing employees down be a distant memory of the past. 👋🏽 Not only is it annoying and inefficient, but it just makes things more difficult than they need to be. We have a better way with Float. Our innovative expense software and corporate cards automate this entire process, helping companies easily track employee purchases in real time while eliminating all of the headaches and paperwork that come with it. When purchases are made using a Float card, employees are instantly notified to submit a digital receipt so that your finance team has everything they need to review expenses, manage budgets and easily claim tax deductions. Float not only helps teams save hours in expense management every month, but we also give you back control over corporate spending in your organization. Not to mention, keeping financial records in the cloud has proven to be safer and more secure – and good for our planet. 💚 If there is any damage such as a fire or flooding in the office, you can ensure that everything is protecting, floating in the cloud!

We’ve got you covered.

Our platform collects your receipts so that you don’t have to – leaving extra space in your filing cabinets and less stress on your mind. With Float, you can: 

Get started fast with our simple set-up & onboarding 🚀

Quickly and easily reconcile your books ⚡️

Track business purchases in real time 💸

Create financial policies for all employees to follow 👍🏾

Instantly notify employees to submit receipts after a transaction 🧾

Set spending limits & approve spend requests in seconds ⏰

Collect and review key financial data all in one place ✅

Are you ready to introduce smarter, more efficient financial processes in your business? Book a demo with Float today!