Building a Strong Financial Foundation for Your Business

business lending business success small business Oct 30, 2023

A business credit report is much like your personal credit report—it summarizes how well your company deals with debt. It includes your business credit score and information about your payment trends and histories. A business credit score measures your company’s creditworthiness using factors like payment history, available credit and judgments like tax liens or bankruptcy.

There are three main business credit bureaus: Dun & Bradstreet, Equifax and Experian. Each produces multiple scores to give potential creditors insight into your business’s financial health and likelihood of on-time payments. Although you aren’t entitled to your business credit report for free like you are with your personal credit report, the information is there for anyone who pays for it.

In order to determine your score, business credit bureaus typically collect payment information from sources such as vendors, banks, data-gathering trade associations and business credit card issuers.

Bureaus typical look at the following factors:

  • Payment history to creditors and vendors.
  • The size and age of your company.
  • Age of your oldest financial account.
  • Credit utilization.
  • Established trade lines.
  • Risk of failure in your industry.

Why is my business credit score important?

There are many reasons to establish and build business credit. First, you will receive better terms on business loans. A solid business credit score can increase your chances of landing a small business loan or line of credit at favorable terms.

You will also receive lower business insurance rates. As your company grows, business insurance costs can get expensive. A high business credit score may help keep rates lower.

Finally, you may receive more favorable payment terms from vendors. Trade credit terms—how long you have to pay a vendor or supplier after receiving goods or services—can range from 30 to 90 days. Where you fall on that spectrum depends heavily on your business credit.

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