Business Credit Scores
Major business credit bureaus are Business Credit USA, Dun & Bradstreet, Equifax Business, and Experian Business,. Each is a source of business credit scores for businesses that need to know theirs, but they use not a universal, standard scale as for personal credit scores but variant business credit score scales. Experian scores on a scale of 0 to 100:- 0 – 15 (High Risk): Such applicants have difficulty obtaining small business financing and should focus on rebuilding business credit.
- 16 – 30 (Medium to High Risk): Such applicants are moderate risks to lenders but may qualify in some cases.
- 31 – 80 (Good Credit): Applicants in this range typically can expect approval of most financing requests.
- 81 – 100 (Excellent Credit): Business credit scores over 80 indicate no barrier to financing.
Personal versus Business Credit
An individual with a social security number applying for a first credit card starts a credit profile with personal credit reporting agencies. This profile or credit report expands with every credit inquiry and every fact reported by those issuing credit. Eventually, the credit report becomes a statement of ability to repay debts. Trade or business credit is similar to personal credit in all other major respects. The major business credit bureaus compile information about trade credit transactions to create business credit reports by business name, address, and federal tax identification or employer identification number issued by the Internal Revenue Service. The business credit bureaus use this compiled data to prepare business credit reports on which lenders or creditors rely to determine whether to extend credit and how much.Building Business Credit
Many factors, not just timely bill payments but, for example, amount of available credit, length of time with a credit profile, and number of inquiries on the profile, can affect a business credit score. The key to establishing a business credit profile and score is to find creditors that establish business credit without using personal credit information and that then report the transactions to the business credit bureaus. Such reports build business credit profiles.Advance Funds Network
One such creditor is Advance Funds Network, which in only a few years has become an established leader in financing small businesses. An entrepreneur may have exciting ideas for expanding a business but need financing to build on them. Without a high credit profile rating and collateral, many banks may refuse financing. Fortunately, Advance Funds Network offers alternate financing in business lines of credit, business cash advances, and other credit arrangements to suit every applicant.The Business Line of Credit
The business line of credit is an easy way to finance business ventures without restriction on what the business may borrow. The business may draw down on the credit line while paying for only money used. As the business builds a track record, additional financing may be available.The Business Cash Advance
As a merchant cash advance differs from a traditional business loan, it is not difficult for a business with no established credit score to qualify for it. There will be no credit check nor any collateral required. The business can use the cash in any way it sees fit and repay the cash advance from future sales proceeds. The applicant and an Advance Funds Network funding specialist create the best cash advance plan. Call now.Frequently Asked Questions
What is a business credit score and how is it calculated?
A business credit score is a numerical representation of a company’s creditworthiness, reflecting its ability to meet financial obligations. Major credit bureaus, such as Dun & Bradstreet, Experian, and Equifax, calculate these scores based on factors including payment history, outstanding debts, credit utilization, and the length of credit history. Scores typically range from 0 to 100, with higher scores indicating lower risk to lenders and creditors. Consistently paying bills on time and maintaining healthy financial practices contribute positively to a business’s credit score.
How does a business credit score differ from a personal credit score?
While both business and personal credit scores assess creditworthiness, they differ in scope and scale. Personal credit scores, ranging from 300 to 850, evaluate an individual’s credit history and are used primarily for personal lending decisions. In contrast, business credit scores range from 0 to 100 and focus on a company’s financial health, influencing decisions related to business loans, supplier credit, and partnerships. Additionally, business credit reports are public and can be accessed without the owner’s consent, whereas personal credit reports require authorization.
Why is it important for a business to establish its own credit profile?
Establishing a separate business credit profile is crucial for accessing financing opportunities without relying on personal credit. A strong business credit score can lead to better loan terms, lower interest rates, and favorable trade credit with suppliers. It also safeguards personal assets by separating personal and business financial responsibilities. Moreover, potential partners and clients may assess a company’s creditworthiness before engaging in business, making a robust credit profile essential for growth and credibility.
What steps can a business take to improve its credit score?
To enhance a business credit score, companies should:
- Ensure Timely Payments: Consistently pay all bills and invoices on or before their due dates to build a positive payment history.
- Monitor Credit Reports: Regularly review business credit reports from major bureaus to identify and correct inaccuracies.
- Establish Trade Lines: Work with suppliers and vendors that report payment histories to credit bureaus, thereby building credit through routine transactions.
- Maintain Low Credit Utilization: Keep outstanding debt levels low relative to available credit limits to demonstrate responsible credit management.
Implementing these practices can lead to gradual improvements in a business’s credit profile, opening doors to enhanced financial opportunities.
