Business Credit: What It Is & Why It’s Important

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When you are looking for financing, it’s important to know how your personal credit score and history will look when the lender pulls your credit. It’s just as important to know how your business credit will look as well, so knowing the ins and outs of your business credit score is very important.

Your business’s credit score begins to form the moment the business is created, since credit bureaus use public records and financial data to create a preliminary report.

Then, just like with a personal score, the business credit score changes depending on a variety of factors, including payment history, outstanding debt, company size, company age, and industry type (and mostly, industry risk).

What is a Business Credit Score?

Your credit score is the key to your financial life:

Your credit score is a number (in the case of business credit scores, it’s usually, but not always, a number from 1 to 100) that represents how trustworthy and creditworthy your business is, whether institutions should lend to the business, and how much they should lend.

A high score is a quick hint telling creditors that your business has paid back lenders on time (or even better, ahead of time) in the past.

Here are some of the factors that affect your business credit score:

  • Payment History
  • Credit utilization ratio
  • Length of credit history
  • Public records that include bankruptcies and judgements
  • Company size
  • Risk factors in your industry

You may notice that most of these bullet points make up what it means to have a strong credit score as well. However, unlike personal credit records, which only you can obtain about yourself, business credit scores are mainly based on public information and are available to anyone willing to pay for it. Competitors can actually pay to look at your businesses credit score, if they wanted.

Ensuring that you have a strong business credit score is a great first step to strengthening your loan application when you need to look for business financing. Harbour Capital has helped thousands of business owners build their credit with smaller initial loans, followed up by bigger loans for massive projects. Give us a call today or apply below for more information.

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