Starting a business is not easy, and not all become successful and operate for a long time. If you are thinking of becoming a business owner, there are many components that you need to work on to not fail. From business planning and marketing to communication and management, you need to have a wide range of skills to be effective. You also have to focus on building your credit score to be on the right track to achieving your goals.
A quick introduction to business credit scores
A business credit score is a measure of your business’s ability to meet its financial obligations, such as receiving and paying off loans and debts.
There are a variety of factors that can affect your credit score, such as your location, start date, company size, sector, owners/shareholders, payment history, credit history length, profit/loss, turnover, and public records.
Importance of a good business credit score
Maintaining a good business credit score opens your business to a lot of opportunities for growth and development. Some good reasons why you should strive to get a good business credit score are:
Higher chances of getting approved for business loans – Especially if you have business expansion plans but are short on funding, getting a loan can help get things running. With a good business score built up through the years, you can get quick loan approvals and achieve your goals.
Increased loan limits – Banks, lenders, and creditors can offer more flexibility to businesses with higher credit scores. Because they see that these companies have established their trustworthiness, they can offer them higher loan limits to help them expand and grow their businesses.
Separation of business and personal finances – It is not uncommon for some business owners to invest their personal savings and other assets into their business. However, eventually, personal finances should be separated from business ones. By working on your business credit score, you can protect your personal credit score in case the worst-case scenario occurs. You can also gain access to higher loans, higher capital, and better interest rates.
Attracting investors – Whether you have plans to expand your business, establish a partnership with others, franchise it, or sell it, having a good business credit score increases your chances of making things happen. With a good business credit score, you can show other companies, financial institutions, etc. that your company is solid and worth investing in.
Checking your business credit score
To stay on top of your business credit score, there are three primary business credit bureaus that you should know about — Experian, Equifax, and Dun & Bradstreet.
Let us say you use choose to go with Experian. With your Experian business credit report in hand, you can see your Experian business credit score, which ranges from 1 to 100 and is calculated using your company’s payment behavior. If you get your Experience business credit report, you can also learn about your financial stability risk rating, which ranges from 1 to 5, and predicts the chances of bankruptcy or payment default occurring within the next 12 months. In addition to your Experian business credit score, your credit report should also provide information on your account history, payment trends, and more.
