Why Your Business Credit Score Matters

Most people keep track of their personal credit score to ensure they’re eligible for home or auto loans, lower interest rates and more. But did you know that businesses can also have credit scores? Failing to pay attention to your small business credit score could be detrimental to your company’s growth over time.

What is a business credit score?

If you’ve ever taken out a home or auto loan or opened up a credit card for personal spending, you’ve established a personal credit score. This score demonstrates how responsible you are in spending and repaying credit.

A business credit score is similar. But instead of tracking your personal creditworthiness, it tracks the creditworthiness of your business. If you’ve opened up a credit card or line of credit for your business—as many small business owners have—you’ll have a business credit score. Payment habits, outstanding balances, years on file and collections all play a role in determining your business credit rating.

Maintaining your business credit score is key

Maintaining a good business credit score can offer many benefits to your business. A lot of these are similar to the benefits of a good personal credit score—lower interest rates and payback terms and the ability to carry less insurance, to name a few. However, there are also many benefits specific to growing and succeeding in your industry.

  • Secure funding more easily: Without a good credit score, your business will have a much more difficult time securing loans or other forms of financing. A good credit score can grant you larger loans and lower interest rates, since lenders have more faith in your ability to pay them back. Alternatively, a bad credit score may prevent you from qualifying for certain loans – possibly any loans ­– due to the lender considering you an increased risk.
  • Establish business stability: Business credit scores are accessible to anyone—not just you and lenders. Therefore, a good credit score for your business demonstrates to the market that your business is stable. If you’re making enough revenue each month to pay your debt on time and in full, lenders and vendors will have more trust in the health and financial future of your company.
  • Build confidence with suppliers: Suppliers that are leasing equipment or providing other assets to your business want to make sure your business is healthy and reputable. Maintaining a solid credit score demonstrates that suppliers can trust you to pay them on time. Too low of a credit score may turn suppliers away from partnering with you at all.

How to improve your business credit score

Personal credit scores range from 350 to 800, but business credit ratings are usually scored between 0 and 100. Generally, a good business credit score falls in the 80 to 100 range, and a credit score below 49 indicates poor credit health.

If your business credit rating isn’t ideal, you can improve it in the following ways:

  • Pay all bills on time
  • Reduce your credit usage compared to the amount of credit available to you
  • Fix credit reporting errors as soon as you notice them

The three major business credit bureaus are Dun & Bradstreet, Equifax and Experian. Each of these allow you to check your business credit score whenever you want, but you may incur a fee to generate your report. If you’re actively working to improve your business credit score, you may want to pay for a bundle or monthly access to monitor your score more closely over time.

At Tenet Financial Group, we can help you explore business or franchise funding options by considering factors like your credit score, and, if necessary, can help you develop a game plan for increasing your credit score in anticipation of applying for a new loan, expanding your new business or buying a new business. Give us a call at (888) 901-3335 and select Option 9 to reach a Senior Consultant.