Business Credit
A business credit can provide key information about a company's financial health, yet many companies aren’t fully aware of what it is, how it works, or how it can be leveraged to help win contracts, prove your company's creditworthiness, or help reduce costs associated with interest rates and insurance premiums.
MORE INFORMATION
What is a Business Credit
If business credit is defined as a company’s perceived ability to make good on financial obligations according to the terms of its contracts, a business credit report is the means by which that ability is expressed.
In other words, business credit reports can help illustrate clearly and quickly what a company’s payment behavior has been like and how that might impact their ability to fulfill contractual obligations now and in the future. Oftentimes, lenders, suppliers, and potential business partners will rely on these reports to help determine the level of risk associated with certain companies and use that information to help decide whether to do business with them or not.
Your Business Credit
Someday, if it hasn’t happened already, your business may need help financing the purchase of new machinery, acquiring inventory, or expanding your operations. When unexpected economic events arise, you may need to open a line of credit to remain operational. Even recurring costs like payroll can be covered by short-term loans.
In most cases, lenders require assurances that they’ll be repaid on time, and one way they can help manage repayment risk is by reviewing the business’s credit scores and ratings on file with the major reporting agencies like Dun & Bradstreet. These indicators can help banks determine whether or not to lend money and at what interest rates.
Frequently Asked Questions
What is business credit?
Your personal credit score is a measurement tool used by creditors to determine your creditworthiness as an individual; your business credit profile is a tool used to establish a baseline of your business’ ability to pay back a loan.
How can I establish business credit?
Once your business is established, be it an LLC, partnership, corporation, sole proprietorship etc. your business credit profile is created. Part of your profile is information about your business included in the public record, so the information you shared with the state or county where you registered your business winds up being the beginnings of your profile. Like your personal credit score, creditors can review your score. Unlike your personal credit score, your business credit profile is public, so anyone who wants to can take a look at it. And, like your personal credit score there are several things that can impact your business credit profile, positively or negatively.
How can I create a strong business credit profile?
Building a strong business credit profile should be a priority for any business owner. If you’re a new business think of yourself as a teenager who wants to apply for their first credit card. You’ll likely to have to start small and build your business credit from there.
Where can I go to see my business credit profile?
There are many places you can go to to view your business credit profile. All of the credit bureaus will give your access to view your score. In fact, because they want to ensure the information they have about your business is accurate, it makes sense to regularly review your profile and they all offer a means to do it. A perk of business credit is that there is no penalty for inquiring about business credit profile.
What are the main business credit bureaus?
The biggest business credit bureaus are Experian, Equifax, and Dunn & Bradstreet
How often should I check my business credit profile?
I’m a bit conservative, but I believe it’s a good idea to check up on your profile monthly. It’s the easiest way to catch errors and fix and issues before they go on too long. We tend to impact the things we pay the most attention to and monthly is not too frequent.
How can I improve my business credit profile?
If your business credit profile is not where you want it to be don’t worry. You can improve it, it just takes a bit of effort.
Does time in business affect my business credit profile?
Your time in business doesn’t necessarily impact your credit profile, but if your business is still in the idea stage or less than a year or two old, it can make it difficult to get a small business loan. A strong profile that shows a history of your ability to use credit and service debt can positively impact your profile. In other words,, the longer your credit history the more information there is in your credit profile to analyze your creditworthiness—particularly if you have a good track record.