All You Need To Know About Business Credit Score

What’s holding you back from receiving a business finance injection? Like your personal credit score, your business credit score is built over time and is crucial when applying for business financing or loans. In laments terms, business credit signals your company’s ability to handle its finances, purchasing ability, and debt.

Both business credit and personal credit impact the rates you will pay for goods and services. If your business credit score is at a good standing (high), you may pay lower insurance premiums and qualify for lower interest rates on small business loans. The negotiation power comes in handy when you want long-term loans. Small business lenders like ByzFunder will still consider you with a business credit score of 500 for short-term financing.

Vendors, suppliers, or creditors report a business’s accounts and activity to a credit bureau. This activity helps to generate the information that informs your business credit scores. Some scores also include information from your personal credit file and business repositories, such as the Small Business Financial Exchange.

So, with all this, how can you build your business credit score?

Check Business Credit

Firstly, before starting, check your current business credit score. Unlike personal credit score, it is not public record; however, there are several ways to check your business’s credit reports. Some free services may grant access to summaries of your business credit reports and scores. What’s more, all three of the major business credit bureaus (Dun & Bradstreet, Equifax, and Experian) will provide a full copy of your business credit report for a fee.

Establish Business Credit

Didn’t find any business credit records? This may be that you have not established business credit just yet. If you use your personal credit card for business expenses, your credit score will be linked to your personal credit reports; thus, we suggest applying for business credit cards to start building credit. Although some business-scoring models can generate a business credit score based on your business and personal credit history and other business financial information, most rely on information related to your business entirely.

So, how else can you establish business credit?

• Incorporate your business or form an LLC (limited liability company) – separating your personal and business identities.
• Get a federal employer identification number AKA a Social Security number for a business entity. This is a free service offered by the IRS.
• Open a business bank account using your business’s legal name.
• Get a dedicated business phone line listed under the legal business name.
• Register with Dun & Bradstreet to get a D-U-N-S number – It’s free for all businesses.

Apply For a Business Credit Card

A good start to building credit is applying for a business credit card. To build a credit score, you’ll need accounts and vendors that report your payments to the credit bureaus. What’s more, business credit cards may offer benefits and rewards programs that are more helpful to business owners, offering features that can bolster your business.

Select Vendors That Report Payments

Build your business’s credit by opening accounts with vendors that report payments to the business credit bureaus. You may have existing vendors that you pay on terms, thus ask that they report the payments. If they don’t, consider opening accounts with new vendors after verifying they’ll report your payments.

Early Vendor Payments

Paying vendors on time is a great way to build credit, getting you an excellent PAYDEX® score of 80. If paying earlier than the pay-off date, you can increase this score. The Dun & Bradstreet PAYDEX® score ranges from 1 to 100, with 100 being the best score, and is based on your payment history with vendors.

It can take time to build your business’s credit, which is one reason to start early. But having good personal credit can also be important. Especially for small businesses, lenders may check an owner’s credit before offering a business loan or line of credit.

If you have solid personal credit, you might qualify for business loans or lines of credit with favorable rates and terms. However, it’s best to keep your business and personal finances separate.

Ready to apply for funding? We offer finance to businesses with a credit score as low as 500. Let us help you grow your business; apply now.