Tradelines vs. Business Loans: Which Is Better for Building Your Business Credit?

Tradelines vs. Business Loans: Which Is Better for Building Your Business Credit?

Tradelines vs. Business Loans: Which Is Better for Building Your Business Credit?

Shortcuts are great when you’re a small business owner. Finding a way to do something faster, easier and more efficiently—without sacrificing quality—means greater productivity and often profitability. 

If you’re trying to understand how to establish business credit, you may wonder what’s the fastest, easiest, or more efficient way to build a business credit profile. Is it a small business loan, line of credit, or business tradelines? 

Find out what’s best for your business, as we explain tradelines vs business loans and lines of credit for building your business’s credit history.

What Are Business Credit Tradelines and Why Are They Important?

Let’s first explain what each of these types of financing mean. 

We’ll start with a business line of credit. Think of a business line of credit like a credit card. You get approved to borrow up to a specific credit limit, and you can borrow as much as you need, when you need it. When you pay it back, you can borrow again. 

Here we are talking about a line of credit you get from a bank or online lender, though it’s worth noting that most business credit cards also offer a line of credit that allows you to use the card to pay for purchases over time. 

Small business loans are harder to categorize as they can take many forms, including traditional bank term loans, small microloans from nonprofit lenders, online business loans, or loans guaranteed by the SBA. 

Finally, tradeline is simply another word for account, and there are different types of tradelines—including loans and lines of credit. 

However, when used in the context of building business credit, it may refer to trade credit (for example, supplier or vendor credit, like net-30 accounts), as well as accounts like Nav Prime that report. That’s how we’ll use it here. 

Just understand that technically any account that appears on your credit report can be considered a tradeline. 

Tradelines of all types, including business loans and lines of credit, are critical when it comes to building your business credit file. These accounts provide valuable information about how your business manages its financial obligations. 

On-time payments, and other factors like credit utilization, are used to create credit scores that predict how your business will handle new credit. 

Which Is Better: a Business Line of Credit, Tradeline or Business Loan?

Whether a business line of credit, business loan or trade credit is better depends on your business needs. 

If you need access to funds when cash flow fluctuates, a business line of credit can be enormously helpful. It allows you to pay for the goods and services your business needs before money comes in. It’s one of the most popular types of business financing due to its flexibility. 

If you have a bigger project and need to borrow a specific amount of money, a term loan can be ideal. These loans often carry a fixed repayment period and predictable monthly payments that make it easier to budget for the repayment of the debt. 

Tradelines like accounts with net-30 payment terms can be great for improving cash flow, as you can buy the supplies or services your business needs and pay for them later—hopefully using revenue the business brings in.

Let’s say you have a food truck, for example. If you can get ingredients, beverages, or even paper products on net-30 terms, you can set up the truck, make sales and then pay those vendors back. 

What Are the Pros and Cons of Using Tradelines Versus Taking Out a Business Loan To Improve Credit?

First, it’s important to understand that not all small business loans will affect business credit scores. That’s because not all lenders and financing companies will report payment history to business credit bureaus. Many do, but if building credit is a priority, be sure to check. 

With that in mind, her are some pros and cons of each option.

Business Loans

On the plus side, many business loans will be reported to business credit bureaus. Some report directly to major business credit reporting agencies, and others report through the Small Business Financial Exchange (SBFE), which then makes that information available to partner credit bureaus like Equifax, Experian, and Dun & Bradstreet.

Since loan amounts may be larger than trade credit accounts, business loans can create a valuable credit reference when paid on time. 

The drawback is that some business loans can be hard to get, especially for new businesses or those with low or declining revenues. Some lenders prefer to lend to borrowers with at least 1—2 years or more in business, and with minimum revenues that could start at $5000—$10,000 or more monthly. 


In the plus column, tradelines like net-30 accounts or Nav Prime are easy to get, and are available to businesses ranging from startups to well-established businesses. 

In the minus column, it will often take more than just one or two of these tradelines to effectively establish business credit. You’ll likely need multiple tradelines to establish strong business credit scores, and some scoring models will look for a mix of credit accounts. 

Do Tradelines Boost Credit Scores?

Yes, tradelines can boost credit scores if they are reported to commercial credit bureaus and they are paid on time, over time. 

Here’s how to find easy net-30 accounts that report

How Many Tradelines Do I Need To Build Business Credit?

Establishing business credit does require you get accounts that report to your business credit history, and pay them on time. 

Ideally, you will want to get at least 2—3 tradelines that report, use them to keep them active, then pay on time. Easy ways to get started include:

1. Net-30 vendor accounts that report to business credit.

2. Nav Prime offers a tradeline submitted monthly to the major business credit bureaus to help you build and maintain a strong business credit history.

3. Business credit cards that report to business credit agencies. (Most do.) Business charge cards, which require payment in full, also help build credit. 

Most business credit cards require good to excellent credit scores, which often means a FICO score of at least 680 or above. If you can’t qualify for a business credit card, you may want to consider a secured business card. These cards can be easier to get, even if you have bad credit or limited credit, because they are backed by your security deposit. 

Use this credit building cards resource to find the right card for your business. 

Should I Use Tradelines or Take out a Business Loan To Improve My Company’s Creditworthiness?

There are multiple ways to build good business credit, so don’t feel like there is only one path to take. If your business doesn’t need a loan, for example, don’t feel like you have to go into debt solely to build your business credit rating.

That said, it often is a good idea to get a line of credit before you need it. That way,those funds will be available when cash flow issues arise, whether that’s a client who pays late, or an opportunity to buy steeply discounted inventory arises if you can act quickly. 

An easy way to get started is with Nav Prime. Not only will it help you check, monitor and manage your business credit, your monthly payment will be submitted monthly as a tradeline to multiple business credit reporting agencies. 

You’ll get both personal and business credit scores* and Detailed Credit Reports from two leading business credit reporting agencies: Equifax® and Experian™, along with business credit scores Equifax® Business Delinquency Score® and  Experian™ Intelliscore PlusSM V2. 

You’ll get personal credit scores and detailed reports from  Experian™ and TransUnion®. Scores provided are the TransUnion® VantageScore® 3.0, and Experian™ VantageScore® 3.0. 

Reports and scores are updated monthly when you log in. This will help you understand what information companies are reporting about your business, and view both business and personal credit in one dashboard.  

Get more helpful information in the Credit Health hub, where you’ll see key factors having the most impact on your scores, aggregate trends in your credit, and insights into new progress you’ve made. 

You’ll also see details on public records, including UCC filings, that can directly and indirectly impact financing or other opportunities. 

Why Would a Business Choose To Use a Line of Credit Rather Than Obtain a Loan and Receive All the Money at That Time?

Why are lines of credit such a popular type of funding for small businesses? It’s because they offer tremendous flexibility. 

If you get a business term loan, you’ll pay it back over time and pay interest until it is paid off. You can get a line of credit before you need it (if your business qualifies). 

Both types of financing may be available through online lenders as well as traditional banks and credit unions. 

Some lenders will check personal credit reports, some check business credit, and some check both. 

Some lenders require collateral, a personal guarantee and/or will place a UCC filing. 

Line of CreditTerm Loan
InterestPay interest only on the amount borrowed.Pay interest on the loan balance until repaid. 
QualificationsMay secure a line of credit before financing is needed.Get financing for a specific purpose. 
Interest ratesVariable interest rates are common. Interest rate may be fixed or variable.

Nav’s Verdict

The main way to build strong credit for your business is by getting tradelines (accounts) that report to business credit, and paying them on time. 

A variety of financing options can help you build credit, as long as the lender or company that offers financing reports payments to business credit. Choose the type of credit that’s right for your business needs. 

Nav can help you check, monitor and manage your credit as well as find the right financing for your business.

*Nav provides access to Experian™ Intelliscore PlusSM V2, Equifax® Business Delinquency Score®, TransUnion®VantageScore® 3.0, and Experian™ VantageScore® 3.0. VantageScore is a registered trademark of VantageScore, LLC.

This article was originally written on June 25, 2024.

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