Get 100 About Your Business!

Yes that’s right, business credit scores range 0 – 100 unlike personal credit that can range up to 850!
There are three main business credit report bureaus: Experian, Equifax, and Dun & Bradstreet.
What business lenders and commercial partners who look at these reports find will impact your ability to get financing and Net-30 or Net-60 payment terms for the goods and services your business uses.
It’s in your best interest to build strong business credit as soon as possible separate from your personal credit.

How is a business credit score calculated?
The credit reporting firms collect three basic types of information regarding your business:
1. Credit obligation information.
2. Legal filings
3. Details of your company’s background collected from public records, collection agencies, credit card companies, state filing offices, and other sources.
Your business credit score is then calculated based on the following factors:
• Credit: This includes things such as credit utilization, payment habits, balances, and trends.
• Demographic details: Business size, years in business, and Standard Industrial Classification (SIC) code.
• Public records: Amounts and frequency associated with bankruptcies, judgments, and liens.

What is the reason for a low business credit score?
There are many reasons for a low business credit score, including but not limited to:
• Missed payments.
• An increase in slow payment of debt.
• Current judgments, liens, or collections on your business profile.
• The number of payments, balances outstanding, and credit utilization.
• Years in business.

So, how exactly does having good credit help business owners?

1. Secure Loans from Top Lenders
Once you start searching for business financing, the options available are somewhat overwhelming. Which will you choose? Obviously the better your score the better your chance at getting the approval from the lenders you choose.
As you research, you’ll likely find some offers that are a better fit for your business, while others don’t mesh well, are too confusing, or overly expensive.
You want the power to decide who to work with when it comes to Lenders you want to work with? Then strong business credit is the key!
2. Access Larger Amounts of Capital
Finding a quality lender isn’t the only thing your business credit can impact, though. The amount of money you qualify for depends on many factors, like the purpose for the loan, your existing collateral, and almighty your business credit score. Lenders typically look at both your personal and business credit scores.
Business owners with poor credit will often be limited in the amount of money a lender will fund them. If you know you’ll need to take out a significant loan for your business, it’s in your best interest to begin building your credit as soon as possible.
3. Get Better Interest Rates
Qualifying is one hurdle the other is making sure your interest rates are not making you owe more then double if not triple what you took the loan out for.
How do you get the best rates? As you probably guessed, good credit is the key component—and that includes business credit. Some loans, like those backed by the Small Business Administration, only charge a 6% APR, while some others can cost you 150% APR or more! How crazy is that!
It’s simple better credit will mean more money you’ll be saving over time.
4. Tap into Trade Credit
Most business owners need to work with various suppliers and vendors to help their business run. That’s where trade credit comes in. Trade credit is the ability to buy now and pay later, which can help solve for cash flow headaches.
A good credit score will give you access to inventory, materials, equipment and services you might need without being required to pay for it all upfront. The better your business credit score, the more likely it is that your vendor will give you a longer repayment time.
For vendors and suppliers, good credit gives them confidence that you’ll pay them back in a timely manner. For this type of credit, they’ll typically look at your Dun & Bradstreet Paydex score. Business owners with a poor score rarely enjoy the luxury of trade credit.
If the companies you work with report trade information to the credit companies, regularly paying them on-time or early will help improve your score; so it’s a win-win!
5. Protect Your Personal Credit
If you have less than stellar business credit, you’ll likely need to use your personal credit to secure financing. While this might be a necessary means to an end during the early stages of your business, it’s never the ideal approach.
One of the first things any business owner should do is separate their personal and business finances and credit. Maxing out your personal credit cards to fund your business can kill your personal credit scores—and if the business fails, all you’re left with is lousy personal credit, making recovery difficult.

The moral of the story? Good business credit is the lifeblood of most business owners. But even if you don’t currently have great business credit, there’s still hope! Just take simple steps at first, like checking your business credit reports, opening a business credit card, and paying all of your bills on time. After six months of “good behavior,” you should notice your business credit scores improve to a point that will help you get financing when you need it most.

Don’t forget if you have a business or and idea for a business we can help walk you through getting your credit in check!