business credit

Many entrepreneurs depend on their business credit scores more than they can imagine. In the past, financial institutions and stakeholders looked at owners’ FICO scores. Then, they decided to grant loans or do business with that company. Today, everyone focuses on business credit scores. The number in question can make or break your small enterprise. Some think that the score is an indicator of your firm’s success. Let’s see today why you need high business credit scores. We will also discuss the impact credit scores can have on your company’s rate of success.

 Understanding Business Credit Scores: Why They Matter

A beginner entrepreneur does not start with an upfront credit rating. Companies have to build a credit history. They also need to manage their credit ratings to achieve high scores. Most people think that credit scores only influence loans and business credits. Things cannot be farther from the truth.

Today, investors, clients, and shareholders want a company to be reliable and credible. Before they give you money or contracts, they will most likely check your Dun & Bradstreet PAYDEX score. The ranking factors in vendors and suppliers. The D&B score (1 to 100) signals financial institutions or other companies a reliable business partner. If you have a business score over 80, doors will open to you. Securing a good business score with D&B, Experian, or Equifax means paying bills on time, gathering little debt, and no legal troubles.

If you want to expand to new venues, your business credit score is your key to success. Let’s see how!

1. Better Loans

When you need a bank loan, a good business credit score grants you access to quick loan approvals. These days, most banks do not approve the majority of loan applications from S.M.E.s. One of the critical factors affecting your credit approval is the information (or the lack thereof) about your company’s credit history.

As you probably know, a “young” business can access small funding without lengthy credit history or with a low credit score. If you check out this website, you will see that alternative lenders care little about such rankings. They care mostly about a company’s potential and business plan. For this reason, many online lenders offer merchant cash advances and small business loans at affordable prices. If you need quick cash flow for emergencies, you don’t need to worry about private lenders’ credit scores.

On the other hand, a company needs more than cash flow or a small loan. If you need a hefty credit, a good score influences the interest you might get. These days, your credit score ties with banks’ offers. A high rank opens the door to the lowest interest rates the financier can offer.

A good business credit score can convince a bank or a lender to extend your credit limit. Your company may qualify for higher limits if you have a good business credit score. It shows that you can meet your financial obligations towards your lender.

2. Office Space Expansion

If you want to expand your business, you might need a larger office building. Or you might want a new one. In this case, you might have to lease real estate. Landlords these days check companies’ business credit reports. The rankings signal proprietors that you pay on time and in full. Before letting you in their office buildings and commercial spaces, they want to know if you are reliable.

3. Attracting Business Partners and Investors

Say you want to close a contract with a serious supplier. That company will check your business credit score. Do you pay your bills on time and in full? Do you incur debt with other suppliers? Do you respect deadlines and specifications? It is crucial in this economic landscape for business partners to trust you. With a good credit score, you might secure a large shipment of materials with a 30-days term to pay the invoice. With a low credit rank, your supplier might ask for money upfront. It is terrible for any business, especially since most have cash flow problems.

Alternatively, say you want to sell a part of your business. Investors do not feel good about companies going down the spiral of debt. Instead of becoming stakeholders in your company, they will ignore you. In turn, it could lead to your firm gathering more debt to make ends meet.

If you want to expand, you need a terrific business credit score. No company will step forward to collaborate with you if you have a low one. They will not invest in your firm unless you prove you are reliable.

The same goes for your clients. Assume you want to sell your products or services. B2B clients will most likely check you out before signing a contract. In their vetting process, your credit score will play a significant part.

Bottom Line

Before you consider loans, investments, expansion, or partnerships, consider your business credit score. It can help you grow. With a low rank, you can, at best, stagnate. It would be optimal if you first learned what factors influence your business credit ranking. If you need to make changes or corrections, make them.

We live in a world where reliability and credibility make or break a business. Keep yours growing and never neglect your business credit score!

Business credit score stock photo by garagestock/Shutterstock