Everything a small business needs to know about how a business credit score is determined and how to improve your credit standing
What is a Business Credit Score? Your business credit score is a number that tells potential lenders how likely it is that you will repay the loan. It’s based on your past payment history, total debt, and length of time in business.
Understanding Business Credit Scores
A high-risk company might have a low credit score because they don’t have enough money or assets to pay back what they owe if their revenue drops. A company with a long track record of paying its bills on time and without going too deep into debt has an excellent chance of getting approved for loans as well as favorable interest rates.
The opposite is also true. The business credit score you get will determine how much money your company can borrow and what interest rate they’ll pay on it. The higher the number, the better for both your bank account and your wallet. If you are looking to start or grow a small business, make sure you work with someone who understands all aspects of business credit scores.
Understanding Business Credit Reporting
A company with a history of paying its bills on time builds an impressive credit score. Business owners can review this information to learn more about the company’s financial health, check for errors, or dispute inaccuracies.
A business owner should keep a copy of these reports because lenders usually don’t disclose them to the owner. Business credit scores are available to anyone with annual revenue of $20,000 or more. As your company grows and becomes successful, be sure that you monitor its score regularly to ensure it’s always in good standing.
Improving Your Credit Scores
The first step to improving your business credit score is understanding what’s on the report and why. Your company’s financial health, payment history, length of time in business, the volume of debt, and how much revenue you bring in will all impact your scores.
As a small business owner, it may be hard to find enough time for everything that needs to get done. That’s why choosing a business credit score provider is so important. Using an automated tracking system will help you keep track of your scores without doing all the work yourself.
According to Lantern by SoFi, bad credit small business loans can be an option for enterprises that can’t qualify for loans from banks or other business credit score providers. A small business loan may help improve the credit score, provided the payments are made on time.
The final step in improving your company’s financial health and credit score is building long-term relationships with lenders, suppliers, vendors, and even customers. If your company is someone others can rely on when they need to get paid or have an issue resolved, it will go a long way towards building up the business credit score.
The most important thing to remember is that your company needs a solid financial base to grow and meet its goals. Building good credit takes time, but it’s worth the effort because it leads to better interest rates, more borrowing power, and improved cash flow so you can get more done.
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