According to Entrepreneur Magazine, less than 10% of all business owners understand how business credit is established1. However, if you want to access capital, it’s important to understand your business credit profile.
So, what exactly is a business credit score? Your business credit score is compiled from credit obligation information, legal files, and background information pulled from public offices. Sometimes referred to as “trade credit”, and much like personal credit, it’s a rating that assesses your business’s ability to pay its debts.
Collections information and payment history may also be factored in and key aspects will include the number of lenders you have worked with, the amount they have extended you, and how prompt you are at paying them back.
Generally speaking, the longer you’ve been building your business credit, the better. Creditors aren’t required to report your payment behavior, which is why it takes some time to establish your business credit. Some business owners can mistakenly go years without establishing business credit.
When you’re applying for a small business loan, many factors will be considered in addition to your business credit score, including your industry, time in business, revenue, and even your personal credit. In addition, lenders like OnDeck report repayment behavior to credit bureaus, which helps to establish your business credit.
To find out more about your business credit score, check out any of the major business credit bureaus:
- Dun & Bradstreet
- Experian Business
- Equifax Business
- Business Credit USA