Worried About Getting a Loan? You Should Know Your Business Credit Score

Shawn Porat

Shawn Porat

Co-Founder at Scorely
Shawn Porat founded Scorely, a free business credit bureau helping businesses build their credit profile. Businesses currently have deep difficultly obtaining loans and securing proper credit terms. The current business credit services available are burdensome and cost prohibitive for small business owners. Scorely helps businesses thrive and take control of their credit.
Shawn Porat

When you want to obtain a business loan, both your personal and business credit can be important factors. Many people, especially when they first start their businesses, rely on personal credit to obtain business loans. You need excellent personal credit to qualify for a business loan this way.

Building up your business credit is an alternative that often makes it easier to get a business loan. Business credit is calculated on a scale, too. While personal credit is ranked between 300 and 850, business credit scores are usually on a scale between 0 and 100. While there’s no official score that qualifies or disqualifies you for a loan, if your business credit is at least 75, you have a good chance of getting a loan.

The Role of Business Credit Reports

When you apply for a business loan, lenders will look up your business credit report. Business credit scores by agencies such as ScorelyExperian, and Dun & Bradstreet are on a scale between 0 and 100, while FICO small business credit scores range from 0 to 300.

The basic factors that are considered when compiling a business credit report include:

  • The size of your business.
  • How long you’ve been in business. This is often measured by the date of the business’s initial financial account. Banks are less likely to provide loans to businesses under 2 years old, which are considered startups. Today, however, there are many alternative lending sources that do provide funding to startups, though usually at a higher APR than established businesses.
  • Revenue: Monthly revenue is an especially important factor for newer businesses.
  • Amount of credit available on business credit cards.
  • Collateral: Property or assets you can use as collateral are helpful for obtaining any type of loan, including small business loans.
  • Payment history, including promptness of payments.
  • Outstanding debts, liens, bankruptcies, UCC flings or judgments connected to the business.

While each credit reporting agency has its own formula for calculating scores, the above are some of the major factors considered when putting together your business credit report.

Your business credit score isn’t the only criterion used by a lender when deciding whether or not to give you a loan. It does play a major role, though, especially with banks and traditional lenders. Alternative lenders are more likely than banks to extend credit if your business (or personal) credit score is less than ideal… But you may have to pay a higher APR.

Improving Your Business Credit Score

Because your business credit score is so crucial for obtaining loans, you should do everything within your power to improve it. The higher your score, the more likely it is you’ll be able to obtain a loan. And when you do get a loan, you’ll be able to get lower interest rates.

One way to build business credit is to establish trade lines with suppliers, even if you’re accustomed to paying for everything upfront. Trade lines help you build credit and also build trust with your suppliers.

Always make your payments on time or, to be safe, early.

It’s also beneficial to have a business credit card and to use it regularly. However, make sure not to max it out! It’s best not to exceed 30% of your credit limit.

Why You Should Check Your Business Credit Report

Every business owner should be aware of their business’s credit score. Even if you have no immediate plans to apply for a loan, you never know when you might need one in the future. Having strong business credit is a safeguard against economic downturns or unexpected expenses. Loans are also useful for expanding your business, allowing you to purchase equipment, hire more employees, or rent more space.

If you don’t regularly monitor your business credit score, you may be unaware of issues. Even small issues, such as a single late payment, can adversely affect your score.

As with personal credit scores, you also have to watch for errors in your business credit score report. One way to prevent errors is to make sure your information with credit reporting bureaus is accurate. However, you also have to check your report so that you can report any incorrect information.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.
Shawn Porat

Shawn Porat

Co-Founder at Scorely
Shawn Porat founded Scorely, a free business credit bureau helping businesses build their credit profile. Businesses currently have deep difficultly obtaining loans and securing proper credit terms. The current business credit services available are burdensome and cost prohibitive for small business owners. Scorely helps businesses thrive and take control of their credit.
Shawn Porat

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