The Benefits of Having a Good Business Credit Score

As a small business owner, it is vital to establish a good credit score. This is crucial when starting a business, as you likely will not have enough cash on-hand to afford all your expenses for your business. this includes startup costs like equipment, inventory, marketing and advertising, and payroll.

If you want to apply for financing to afford necessary expenses, you will need a good credit score. Most lenders will consider your credit score when reviewing your application for a loan or consumer credit, so it is imperative that you improve or maintain your score.

Even if you get approved for financing with a low score, you will receive worse terms than a business who has a . This can hurt your business as the funds might be too expensive and can take a long time to pay off your debt.

What Is a Good Business Credit Score?

It is important to understand what a good business credit score is. Every business credit bureau has their own scoring models and most range from 0-100. Below, we will review the most popular business credit reporting agencies and what they would consider to be a good business credit report and score.

The most popular agencies are Dun & Bradstreet, Experian, and Equifax. With Experian, you want a 76-100 credit score, which is low risk. You will need to find ways to improve your score if this applies to you. Equifax assigns you three scores in their credit report. These scores measure payment index, traditional credit risk score, and business failure score. Dun & Bradstreet PAYDEX will have your score fall between 0 and 100 but you will want to be at 80 or higher to be considered good.

Why a Good Business Credit Score is Important

It will be easier to qualify for a loan:

A big advantage of having excellent business credit is the ease in which you can qualify for a small business loan. Lenders are hesitant to lend money to businesses with poor credit history for fear they will not be able to make their payments on time or worse, not at all.

You Will Get Better Loan Terms

Lenders will be more likely to offer loan terms that are more favorable if they have proven their creditworthiness. Better terms can benefit your business for the better. Low interest rates will help you save so much money by simply having a great credit score.

It Protects Your Personal Finances

You can separate your personal and business financial obligations with business credit. Your company debts will be reported on your small business’s credit reports, saving your personal credit rating from being impacted from any problems that might arise.

You Will Get Better Terms from Suppliers

When you have good business credit, your suppliers will be able to trust that your business is financially stable and capable of repaying debts in a timely manner.

Get Access to Cash for Growth and Expansion

Even if your business can meet its current financial needs without credit, you can get an expansion so that you can get new equipment, inventory, or facilities to help you get started and help grow your business.

The Bottom Line

It is evident that there are many benefits to having a strong business credit score. Whether you own a new business or a well-established operation, it is important to build your credit score so you can pursue your financial and business goals.