31+ Sample Business Credit Applications

What Is a Business Credit Application?

A business credit application is a printed or written document by an individual or a company, either for seeking a credit line or asking for a credit extension from another business, firm, or financial, or lending institution. An organization that focuses on investing credit in startup businesses considers the document as a valuable report. It details the financial situation of a company, whether they are viable for applying for credit. A credit application allows a firm to investigate a client’s credit history, employment status, existing accounts, and ability to pay back what a firm lends for its business. There are regulations to follow when filing for business credit applications, and there are laws such as Truth In Lending Act that administer consumer protection and transparency.

According to an article on the United States Small Business Administration website, a study conducted by the National Small Business Association regarding Small Business Access to Capital Study, about 20 percent of loans by small businesses end up denied because of business credit. Roughly 1 out of 5 starting companies do not get the funding they need from financial institutions.

The Five C’s of Credit

When filing for credit applications, whether for personal or business use, acquiring credit knowledge is always advantageous. The five C’s of credit is a phrase that defines the five major factor that determines the creditworthiness of an individual or company. Lending institutions use these as a basis for quantifying and deciding if an applicant is eligible and determining interest rates and credit limits for current borrowers.

Character: Character denotes the reputation of the individual or company or record regarding financial matters. It is the most comprehensive factor in evaluating a client’s creditworthiness. The premise is that a person’s past behavior best predicts their future behavior and where lenders put their attention. A person’s track record demonstrates if they have positive rankings in terms of credit management and payments. Failures from negligence, late settlements, and irresponsibility on credit records imply undesirable character traits. Some institutions provide rating services, like banks and credit rating agencies compile a detailed list of credit histories. Each agency has its methods of determining character, honesty, reliability, including quantitative and qualitative processes. Subjective reports may include employment history, personal and business references, and even personal interviews. A high credit score signifies lesser financial risk for the lender.Capacity: Capacity is the factor that determines if the applicant will be able to repay the loan according to the loan amount and term proposal. For a business credit application, various lending institutions review a company’s previous cash flow statements in determining the income from operations. Investigating the number and amount of current debt responsibilities the borrower has and comparing it to their revenue or income each month also helps determine capacity. Different lenders have various formulas to determine an acceptable reach to loan or borrow funding. When it comes to mortgage companies, they calculate using the debt-to-income ratio. The ratio states an entity’s monthly debts as a percentage of monthly revenue. If an applicant has a high debt-to-income ratio, agencies view this as a gamble that leads to a decline or repayment term adjustments that cost more the longer the loan duration.Capital: In terms of the initial value, lending agencies consider the initial that a company seeks as an investment. When applying for business loans, capital refers to the business owner’s personal investment in the firm, retained earnings, and all other assets under their control. Generous contributions made by the individual seeking a loan lowers the chance of default. Lending agencies view capital as additional means and information regarding the business owner’s capability of debt repayments if and when their source of revenue or income halts while still in the repayment term. Large or local banks prefer borrowers that hold more prominent capital investment because it indicates the level of seriousness from borrowers, making a clear statement that they are worth receiving credit. Downpayment size also influences the rates and terms of a borrower’s loan credit, with more generous initial investments resulting in better rates and terms. Financial institutions see using personal assets to contribute to the initial capital shows that individuals are willing to face risks that come with the loan and have significant stakes in the company’s management.Collateral: When financial institutions assess a business and its business owner, especially for securing finances like loans or investments, they require borrowers to pledge personal assets to acts as security for financial obligations known as collateral. Having collateral helps borrowers to secure financing from lenders. Through it, lenders gain assurance that a borrower who chooses to default a loan can repay the investments and values through repossessing the collateral. For business-centered borrowers, utilizing business equipment or accounts receivable as collateral for securing investment, credit, or loan is advisable. Loans with collateral are known to be secured loans or debts. These kinds of loans are generally of low risk to lenders because of the reassurance. That is why secured loans possess offers with lower interest rates and better terms, comparing them to unsecured loans or loans without collateral. Collateral serves as a significant consideration for credit. However, it varies depending on the loan a borrower is getting, at the same time, with the financial institution.Conditions: Conditions refer to the terms and conditions of the loan itself, including other economic factors that come into play affecting the borrower. The stipulations also include the interest rate and principal amount, where lenders assess the associated risks with using the loan upon the borrower’s receipt. Business lenders also pay attention to the overall economic condition and the loan’s purpose. In filing for business credit applications, companies often request finances for reasons like working capital, equipment, or business expansion. Financial institutions also analyze the company’s need to carry on the debt of having loans. Out of the five factors that influence credit, it is the most subjective and undergoes qualitative investigations. As such, lenders will want to know if the present business conditions either improve or deteriorate during the term.

Components of a Business Credit Application

Well-constructed business credit applications make or break a company applying for credit. It is a vital part of any credit extension policy and serves various business functions. It helps with decision-making processes, records necessary information, and is a legal document in litigations. Below are the components of a business credit application.

Customer information: It contains the legal name of the business, including tax identification numbers, business address, business phone, and other contact information. It also includes the owner’s name, incorporation date, and the duration of business operations.Customer financial information: It details the financial assets, debts, annual revenue, net income, working capital, and the amount of credit request.Banking and trade references: Trade references give information about the company’s history in paying their credit dues. Banks provide an overview of a borrower’s credit history and financial health. The borrower commits to writing a set of three references, or the lending institution can use information from credit agencies for an impartial report.Legal data: A business application requires validity and certification of data reflecting in the document. It also details an acceptance of the terms and conditions by the borrower, including late fee payments and interest rates.

How To Create a Business Credit Application

The business credit application serves as a vital opportunity to prove to lenders that your company has no issues in terms of debt repayment and holds appropriate credit risk for the institution. For your business credit application to stand out above the rest, here are some tips you can utilize.

Tip #1: Check Your Personal Credit or Scores

There is an advantage in knowing the standing of your personal credit or score before applying for a loan, credit, or investment. It is essential because it is one of the significant factors that lenders use to evaluate an individual’s creditworthiness. You can get a copy of your annual credit report for free through the website annualcreditreport.com. It is especially advisable to check your credit reports on an annual basis to see if there are any mistakes or errors and take the necessary steps to correct the information. Make sure to visit the three national credit bureaus, Equifax, Experian, and Transunion, to see if the information you have for all three is accurate.

Tip #2: Check the Business’ Credit Reports and Scores

In seeking credit reports and scores for a business, business owners can go directly to Dun & Bradstreet, Experian Business, and Equifax Small Business. You can use these business credit reports and scores to decide the approval of business, loans, and credit. It is critical to note that businesses without registrations to credit reporting agencies will only have personal credit reports in credit risk assessments. Obtain your D-U-N-S® number to set up your company profile with Dun & Bradstreet for lenders to view your company’s credit scores and reports.

Tip #3: Indicate Strong Trade References

Providing lenders with competent trade references instills confidence in the business’s ability to repay loans or credit. Some suppliers do not report payment histories to credit bureaus. However, these are the trade references the company must have to supply the information for a business credit application. Your company’s trade references are one of the most reliable factors to measure the stability of a company’s financial health and management capabilities. Provide your trade references’ details by indicating the company name, address, and contact information.

Tip #4: State the Company’s Financial Status

Cash flow cycles provide detail for revenue coming in and out of business. It serves as an essential factor in determining whether a company has the ability to repay loans and credit. Guarantee that all financial statements are in order before applying for business credit. Most lending and financial institutions ask for profit and loss statements (P&L), cash flow statements, existing bank accounts, and other assets and investments a company is currently tied to.

Tip #5: Provide a Document of Your Business Plan

When it comes to loaning or asking for a line of credit, businesses often need to provide lending institutions with documentation of their business plan. Banks often request a standard summary of the company, its products or services, market, management, teams, and financial statements.


What is a credit application form?

A credit application form collects necessary information from individuals applying for credit to help firms, agencies, and lending institutions to assess credit suitability settlements. A credit application form acquires full business details, contact information, financial details, payment terms, and guarantees.

How does the credit application process go?

Credit review processes are essential to guarantee that individuals filing for credit can comply with repayment terms, with consideration to interest rates and other fees. Through a manual system process, it starts with the receipt of a sales order, issuance of credit application,  review of the application, designation of credit levels, sales order approval, and filing for credit documentation.

How long are credit applications valid?

As a rule of thumb, an individual must wait six months to a year before applying for a new line of credit. It is within this period that a person’s credit scores can increase by keeping your credit balance low and paying fees and other dues on time. However, if your credit score is already in good standing, applying for new credit can go through smoothly.

In any business, keeping your company in good credit standing helps with applying for loans or even new credit lines for the company. Ensure that the company pays its dues on time and that repayment is not of concern. It is also advisable to monitor the company’s financial health and management capabilities in business credit applications. Keep up to date with financial, cash flow, and profit and loss statements to support future business credit applications. In the article above, several business credit application samples are available for use and download for your company’s future credit requests.