There are a good number of business owners that are simply unaware of their business score. Subsequently, they don’t understand why this score is important and how it can help with business growth. Whether you just launched a startup or you have been in business for years, it’s time to get a better grasp on the importance of business credit. Let’s delve a bit deeper into this top.
How Business Credit Works
For starters, good business credit will enable you to boost the value of your business and secure financing. It can also serve as a way to protect your individual credit score, which is critical. This begs the question: What exactly is business credit? It’s an assessment of how a company handles its financial responsibilities. Much like personal credit, it provides an overview of a company’s financial track record, which is used by investors, lenders and others to make important decisions.
A business credit score has a range from 0 to 100. Generally, a good business credit score is 80 or above. When a company has a high business credit score, they are considered a low risk. Some of the most common reasons why a business credit score is low include bankruptcy, liens and late payments to creditors. Other factors include how long the business has existed and the size of the company. At Pine Advisors, we help clients understand what’s necessary to obtain and sustain a high business credit score.
Importance of Business Credit
Instead of your social security number, the credit for your business will be tied to a Tax ID number, which limits liability. When a business establishes financial accounts, there’s a good chance that the institution will run a business credit report. This includes investors, banks and other stakeholders that need to determine the creditworthiness of a business. For instance, business credit may be pulled when establishing insurance premiums, loan terms and lines of credit. A low business credit score can hinder a business in all of the areas mentioned, which can negatively impact growth. Unfortunately, a business that is unable to obtain financing or low interest rates has a much greater chance of failure.
Building Business Credit
If you don’t know whether or not you have business credit, you can find out by requesting a business credit report from a credit bureau. This includes Dun & Bradstreet, Equifax and Experian. If you are currently leasing office space or have done so in the past, you probably have business credit. The same applies to receiving a loan for your business. Notably, it’s important to review your business credit report to make sure there are no errors since it’s used to make important decisions that can impact the future of your business. This is no small matter, which is why it should be reviewed at least annually.
Having good business credit isn’t optional, especially if you have a business growth strategy and don’t want to remain stagnant. Boosting your score can be as simple as paying all of your bills on time moving forward. If you have had financial issues in the past, it’s possible to turn things around. You can work with a representative from Pine Advisors to find out how to accomplish this goal.