Business Credit

Business Credit

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What Is a Business Credit Score?

A business credit score measures the creditworthiness of a business. The scores range from 0–100. While the major business credit reporting agencies—Experian, Equifax, and Dun & Bradstreet—differ in the specific criteria they use, they use several common criteria to calculate business credit scores. Unlike personal credit scores, your business credit score is available to the public, so potential lenders, vendors, customers, and even your nosy neighbor, Bruce, can see it.

Business credit score criteria

Experian, Equifax, and Dun & Bradstreet all use these common indicators in their reporting of business credit scores:

  • Years in business
  • Credit lines applied for in the last 9 months
  • Credit lines opened in the last 6 months
  • Payment history for the previous 12 months
  • Number of late payments

Benefits of strong business credit

A solid business credit score can help you:

  • Qualify for small business loans, lines of credit, and credit cards
  • Secure better rates and terms on financing
  • Build a safety net that makes it easy to take out emergency loans or lines of credit if you fall on hard times
  • Do business with new vendors and suppliers
Coffee Shop Business Credit Stats
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High scores bring big rewards

The #1 reason that traditional lenders reject most small business owners is bad credit. Building a strong business credit score brings you better rates and terms on small business loans and financing. And that’s only the beginning of the benefits.

If your business is ever hit with hard times, a strong business credit score provides a safety net by making it easy to take out emergency loans or lines of credit. On top of that, vendors and suppliers are more likely to do business with you when your credit is solid.

The #1 reason that traditional lenders reject most small business owners is bad credit.

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How to Build Business Credit

You’re likely here because you’ve asked yourself, “How do I get good business credit?” We’ve helped more than 100,000 businesses get funded since 2011. In doing so, we’ve learned a thing or 2 about how to establish, build, and repair business credit. No matter where you are in the process, here’s what you need to do. 

Establish Business Credit

These are the first steps you need to take to establish business credit for your business. 

Make your business a legal entity

Your business must be a corporation or limited liability company (LLC) to be assigned a business credit score. In addition to helping build business credit, establishing your business as a legally separate entity like an S-corp or LLC can protect your personal assets from business liabilities. LegalZoom can do this for you without the expense of a lawyer. 

Open a business bank account

Once you’re legally separated from your business, you want to separate your business and personal finances. Opening a separate bank account for your business makes it easier to see important financial indicators for a business like income, financial assets, and expenses. 

After you’ve taken the 2 essential steps to establish business credit, you’re ready to start improving your business credit score. 

Improve business credit score

The business credit score requirements vary from lender to lender, so as much as we wish we could give you a golden number, there isn’t one (sorry). Whatever your business credit score, you’ll benefit from improving it—whether that means helping you qualify for a new loan product or better rates and terms. 

Use a business bank account for expenses

Your business bank account should only be used for business expenses. This approach will help you to build business credit, streamline bookkeeping, and protect your personal financial assets from business liabilities. 

Make timely payments

If you only take one piece of advice for building business credit, let it be this one. Making payments on time is the #1 way to build, improve, and repair your business credit score. It’s the cornerstone of credit data and a surefire indicator of creditworthiness. Here are 3 steps you can follow to ensure timely payments:

  • Sign up for auto-pay: Most recurring bills offer the option to have the amount deducted automatically from a bank account of your choice. 
  • Use bill-pay reminders: You can enter your bills into your calendar, or you can use reminders from software like Microsoft Money or Quicken. 
  • Schedule a bill-paying time: Carve out a regular time slot on your schedule every month to formally sit down and take care of your bills. 

Open a business credit card

Once you’ve mastered making payments on time, you’re ready to take your business credit into your own hands. Opening a business credit card will help you to build business credit in 2 ways. First, it will bolster your history of on-time payments. Second, it will improve your credit utilization ratio, i.e., how much credit is available to your business vs. how much you’re using. Bonus: business credit cards often offer rewards, so you can make your business expenditures work for you.

Increase available credit (taking out a loan, etc.)

Remember what we said about the importance of on-time payments? When you establish a history of repaying a loan on time, that demonstrates creditworthiness. In turn, you’re more likely to qualify for or secure better rates in the future. With a variety of loan options, like equipment loans or business lines of credit, you can find a loan that can work double duty, meeting your business needs and helping you improve your business credit score at the same time.

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How to Check Your Business Credit Score

Your business has a credit score (whether you check it or not). Any company, lender, investor, or partner can (and will) find your score, so it’s best to be proactive and see it first. You can then decide if the credit score is adequate or if you need to take steps to improve or repair it.

There are free and paid options for learning about your business credit. Let’s look at both—starting, of course, with the free option.

Where to Get Free Business Credit Reports

Dun & Bradstreet’s (D&B) CreditSignal service alerts you if your scores or reports change. However, you’ll have to pay to access your detailed credit report. According to their website, “CreditSignal only indicates that your D&B scores and ratings have changed and alerts you when your business credit file has been purchased.”

Try using a credit monitoring service like Nav. Nav will let you access a summary of your Experian Intelliscore report and Dun & Bradstreet Paydex report just by signing up for a free account. These reports provide business credit grades for your scores, summary reports, personal credit scores from Experian, and free resources to help you continue building stronger business credit.

Where to Get Detailed Business Credit Reports

The 3 major business credit reporting agencies offer detailed reports on your credit. These reports are the most informative you’ll find. However, they all cost money:

  1. Dun & Bradstreet: D&B generates your score and report. You’ll need a DUNS number before you check your credit report, and you’ll also have to subscribe to a CreditBuilder Plus account.
  2. Equifax Business: Make one-time or bundle purchases to pull your Equifax report, Equifax Business Credit Risk Score, and Equifax Business Failure Score. 
  3. Experian Business: Subscribe or make one-time payments to access your current Experian score and credit report. 

Repair business credit score

If you find yourself looking at a low business credit score, worry not. Any credit score can be improved. Follow these steps to repair your business credit:

Check your business credit score

You need to know what your business credit score is before you can repair it. Not sure how to go about it? We’ve outlined everything you need to know about checking your business credit score. 

Look for mistakes

Credit reports are not infallible. Once you pull your credit report, you want to look for errors—like payments that haven’t gone through or were never reported. 

Make corrections

After you find a mistake, you can contact the credit bureau with evidence of your payments or contact your vendor and request that they update their reports with the bureau. There may be a lot of paperwork, so if you’d rather outsource this task, our partner Lexington Law specializes in business credit repair. 

Take care of outstanding debts

Paying down outstanding debts will help repair your credit. Focus on making payments early or on time. If you find yourself struggling to repay a loan or to pay off the balance of a credit card, pick up the phone and talk to your lender before defaulting on the debt. They may be able to help.

Make payments on time

We’ve said it before, and we’ll say it again: making payments on time is the single most important thing you can do for your business credit.

Can You Still Get a Loan with Bad Credit?

As you work to improve and repair your business credit, you may still be able to qualify for a small business loan. Here’s how:

 

If you need a business loan but your credit score isn’t perfect—don’t panic!

Your credit does play an important role, but it’s not the only thing lenders look at. They care about other things, too:

  • Business plan: Your business plan says who you are, what you want, and where you’re going. A solid business plan can go a long way in building confidence with your lender.
  • Use for the loan: Lenders want to know where the money is going. They’ll be more likely to lend money to fund lower-risk investments.
  • Time in business: Lenders care about your business’s history and your own management experience. If you’ve been successful before, there’s a good chance you’ll do it again.
  • Financial projections: Lenders understand it takes money to make money. If you have documentation to prove that strong sales are on the horizon, lenders may be willing to take a chance on you.
  • Collateral: Lenders will be more willing to lend to you if they can guarantee the investment with collateral. 

These factors all play a role in scoring a business loan—not just your credit score. However, if you don’t qualify for a traditional loan, you still have other financing options. 

  • Business credit card: Business credit cards are a great financing option for small businesses. Plus, they build your credit so you can score bigger, better loans down the road.
  • Secured credit card: If you don’t qualify for a business credit card, look into a secured credit card. These cards operate much the same way as a business credit card, except for you’ll need to provide a deposit or collateral up front.
  • Merchant cash advance: A merchant cash advance lets you trade tomorrow’s earnings for cash today. Cash advances aren’t really a loan, but they’re still a great financing tool when you don’t have many options.
  • Accounts receivable financing: Trade your outstanding invoices for cold, hard cash today. Lenders care less about your credit score and more about your client’s business credit—since they’ll be collecting the money from your clients, not you.
  • Microlenders: Microloans can seem teeny-tiny in the grand scheme of things, but every dollar counts. Microlenders have less risk lending smaller amounts to businesses with poor credit, so they’re a great option for getting capital and building your credit.

FAQs

How do you build business credit if you have bad personal credit?

Your business credit and personal credit aren’t linked—but they can be related. If you’re a sole proprietor with little business experience under your belt, lenders will likely look at your personal credit to see how you manage debt.

You can follow many of the business-credit-building best practices even if you have poor personal credit:

  • Obtain an EIN
  • Open a business credit file with major credit reporting agencies
  • Establish vendor tradelines (essentials lines of credit with specific vendors and suppliers)
  • Apply for a business credit card
  • Get a small working capital loan

What is a good business credit score?

Different credit bureaus use different rating systems, but business credit scores usually range from 0 to 100. Any score above 75 is considered excellent, but most lenders won’t bat an eye unless your score is under 50.

This spread is different from personal credit scores, which usually range between 300 and 850.

How can you build business credit fast?

Credit-building isn’t a race or one-and-done ordeal—it’s a lifelong, business-long pursuit. You’ll need to do the small things right over time, like managing your debt and making timely payments. The quickest way to build your business credit is to make it a priority starting today.

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