A business credit score is as important as your personal credit score. Your business creditworthiness is calculated based on your financial history, trade experiences, outstanding balances and much more. Credit scores are generated by Credit Reporting Agencies (CRA). It indicates the lenders how trustworthy you were with your past-payments and how likely you’re to promptly pay your future loans.
Let us say, you would want to expand your current business or set up a new company, what’ll be the first word that strikes your mind?
Yes. It is “Funding”.
When running a small business, you might not have enough cash handy to provide for business needs including inventory, purchasing equipment and managing other costs. In those situations, approaching a financial institution would be the only option. Financial institutions will, in turn, pull your credit report to analyze your business credit score.
Hence, it is very important for business owners to understand the importance of building a good business credit score in addition to their personal credit score. Here are a few reasons why a good credit score is important for your business.
Benefits of having a solid business credit score:
- Qualifying for business loans would be an easy process
- You will receive better loan terms and insurance premiums
- It is easy to obtain business loans without submitting any personal guarantee which in turn protects your personal assets
- You will get more favorable terms from investors
- Your suppliers will be more comfortable in allowing you to purchase items on credit and forgo pre-payments
- You get the money that you need for expansion/growth of your company without any hassle
- Furthermore, it helps you stay ahead of your business competitors
In short, your business credit score is one of the many factors of your company that requires legitimate attention.
It speaks a lot about you to your lenders, suppliers and even customers. When you have a solid business score, it is certain that you can make confident decisions time and time again.