Checking Your Business Credit Score: What Every Small Business Owner Needs to Know

A business credit score is a crucial metric that lenders, suppliers, and partners use to assess the financial health and creditworthiness of your company. Whether you’re seeking a merchant cash advance, a business term loan, or any other form of business funding, your credit score can significantly influence the terms and conditions offered by lenders. In this article, we’ll explore everything you need to know about checking your business credit score, why it matters, and how it impacts your access to various financing options.

Why Your Business Credit Score Matters

Because it is a reflection of your company’s creditworthiness, much like a personal credit score reflects an individual’s financial health. It is used by lenders, suppliers, and even potential business partners to evaluate the risk of extending credit or doing business with you. A strong score can lead to:

• Lower interest rates on business term loans and other types of financing.
• Higher credit limits and more favorable terms on lines of credit and credit cards.
• Better relationships with suppliers, who may extend more generous payment terms.
• Increased opportunities for growth through easier access to merchant business funding.

On the other hand, a poor score can limit your options, leading to higher costs of borrowing and less favorable terms.

Who Needs to Check Their Business Credit Score?

Every business owner should be aware of their credit score, but it is especially crucial for those who are:

• Applying for a business loan: Whether it’s a small business term loan or a commercial term loan, lenders will review your business credit score to determine your eligibility and the terms of the loan.
• Seeking new lines of credit: If you’re looking for a term loan for business or a line of credit, a strong credit score can help you secure better terms.
• Planning to enter into contracts with suppliers: Suppliers may check your business credit score before extending credit terms, especially for larger orders.
• Expanding your business: If you’re planning to grow your business and need additional funding, your credit score will play a key role in your ability to secure the necessary capital.

How Business Credit Scores Are Calculated

Business credit scores are calculated differently by various credit reporting agencies, but they generally consider factors such as:

• Payment history: Whether your business pays its bills on time.
• Credit utilization: The percentage of available credit you’re using.
• Company size and age: Larger, more established businesses may have higher scores.
• Industry risk: Some industries are considered higher risk than others.
• Public records: Any liens, judgments, or bankruptcies.

Major Business Credit Bureaus

In the United States, the three primary business credit reporting agencies are:

1. Dun & Bradstreet (D&B): Known for its PAYDEX score, which ranges from 0 to 100.
2. Experian Business: Provides a business credit score from 1 to 100.
3. Equifax Business: Offers a credit risk score ranging from 101 to 992.

Each of these bureaus has its own methods for calculating scores, and it’s a good idea to check your business credit report with all three to get a complete picture.

How to Check It? Credit Report Providers

To get a credit report is not as straightforward as checking a personal credit score, but it is still an essential step in managing your business’s financial health. Here are some ways to check your business credit score:

1. Dun & Bradstreet (D&B)

• Website: Dun & Bradstreet
• What They Offer: D&B provides a free service called CreditSignal that alerts you to changes in your PAYDEX score, but you’ll need to pay for detailed reports.
• Why It’s Important: D&B’s PAYDEX score is widely used by lenders and suppliers, making it one of the most critical scores for businesses to monitor.

2. Experian Business

• Website: Experian Business
• What They Offer: Experian offers a Business Credit Score Report for a fee, but they also provide a free snapshot of your business’s credit status.
• Why It’s Important: Experian’s score is used by many lenders, especially for small business loans and lines of credit.

3. Equifax Business

• Website: Equifax Business
• What They Offer: Equifax provides various business credit monitoring services for a fee, including detailed credit reports.
• Why It’s Important: Equifax is another major player in business credit reporting, and their reports are used by lenders and suppliers alike.

4. Nav

• Website: Nav
• What They Offer: Nav offers a free service that allows you to view summaries of your business credit reports from D&B, Experian, and Equifax. They also offer premium services for more detailed reports.
• Why It’s Important: Nav’s platform is user-friendly and provides an excellent overview of your business credit health from multiple bureaus.

5. CreditSafe

• Website: CreditSafe
• What They Offer: CreditSafe provides business credit reports and scores, including international data. Services are generally paid, but they offer some free resources.
• Why It’s Important: CreditSafe is particularly useful for businesses that operate internationally or plan to expand globally.

6. Tillful

• Website: Tillful
• What They Offer: Tillful offers free business credit scores based on alternative data, which can be useful for newer businesses or those without extensive credit history.
• Why It’s Important: Tillful’s scoring model is unique and can provide insights that traditional credit bureaus might miss.

7. Ansonia Credit Data

• Website: Ansonia Credit Data
• What They Offer: Ansonia provides business credit reports and scores, with a focus on the transportation and logistics industries.
• Why It’s Important: Ansonia’s reports are valuable for businesses in niche industries, particularly those in logistics and transportation.

Steps to Improve Your Business Credit Score

If your business credit score isn’t where you’d like it to be, there are several steps you can take to improve it:

1. Pay Your Bills on Time

Late payments are one of the most significant factors that can negatively impact your score. Make sure to pay all bills, including loans, credit cards, and supplier invoices, on time.

2. Reduce Credit Utilization

Aim to keep your credit utilization ratio below 30%. This means using less than 30% of your available credit at any given time.

3. Establish Trade Lines with Suppliers

Work with suppliers who report to credit bureaus, as this can help build your business credit. Ask your suppliers if they report your payment history.

4. Regularly Monitor Your Credit Reports

Regularly checking your business credit reports from the major bureaus can help you spot errors and take action to correct them. Even small mistakes can significantly impact your score.

5. Diversify Your Credit

Having a mix of credit types, such as term loans for business, credit lines, and credit cards, can positively impact your credit score.

6. Limit Credit Inquiries

Too many credit inquiries in a short period can lower your business credit score. Only apply for credit when necessary.

The Role of Business Credit Report in Different Types of Loans

1. Merchant Cash Advances

While merchant cash advances are often easier to obtain than traditional loans, your business credit report can still influence the amount you can borrow and the advance’s cost.

2. Business Term Loans

For term loans for small businesses, your credit report is a critical factor. A higher score can lead to lower interest rates and better repayment terms.

3. Commercial Term Loans

For larger, commercial term loans, banks and traditional lenders heavily rely on business credit report to determine eligibility and terms.

4. Small Business Loans

For any small business term loan, especially those from the Small Business Administration (SBA), a strong business credit score can enhance your chances of approval.

Conclusion

Your business credit score is a vital asset that can open doors to better financing options, favorable terms with suppliers, and increased business opportunities. Regularly monitoring and managing your credit score is essential for any business owner looking to secure term business loans, merchant business funding, or any other financial products. By understanding how your score is calculated, taking steps to improve it, and knowing where to check it, you’ll be well on your way to maintaining a healthy business credit profile.