Do you know your business credit score? If you’re like most small business owners, you’re probably looking at the question and scratching your head. According to a 2016 survey by Manta, an online small business community, 72% of people who own small businesses are clueless about their business credit scores, and 60% don’t know where to find the numbers!
Your credit score affects your ability to qualify for a loan when you need funding to fill gaps in cash flow, purchase new equipment or grow your business. If you’re in that position, it’s important to know not only what your score is right now but also how to monitor it on a regular basis. The higher your score, the less of a liability your business poses to lenders, and the more financing options you have.
Here’s everything you need to know to understand, monitor and improve your score (and boost your ability to access funding).
Your personal FICO score depends on five factors:
Business credit ratings are calculated a little differently than personal scores.
Unlike your personal FICO score, which relies on an industry standard, the way business scores are determined varies between each of the three reporting bureaus: Dun & Bradstreet, Equifax and Experian. These bureaus don’t always collect and verify the same types of information, and the factors they take into account differ:
Credit inquiries and credit mix matter more for your personal score than for your business. If you’re a small business owner and you apply for a type of funding where personal score is important, though, these factors can affect your eligibility.
Business credit reporting agencies don’t use the same information or criteria to calculate your score. For this reason, you need to work a little harder to understand the numbers than you do with a personal score.
Personal FICO numbers are reported on a scale ranging from 300 to 850. A score of 670 to 739 is considered good, 740 to 799 is very good and 800 or more is excellent. About 46% of people fall into the “good” or “very good” ranges.
As a business owner, you have to look at several numbers from each bureau to get an idea of how your financial status appears to lenders who check your credit when you apply for a loan:
There’s also the FICO LiquidCredit SBSS score, which is a little more straightforward. The number is based on both personal and business credit information. Generally, a score of 140 or more on the 0-300 scale is what you need to qualify with most lenders.
How can you perform your own business credit score check? Unfortunately, you can’t grab a free report once a year like you can for your personal FICO score.
Dun & Bradstreet charges $61.99 for a report, Equifax charges $99.95 and you can get an overview from Experian for $39.95.
If you want to check your business credit score for free, you can sign up for a free trial of a service like CreditSafe or Credit.net. However, it’s important to be aware you’ll eventually have to pay if you want ongoing monitoring. You’re also entitled to a free credit report if you’re turned down after applying for a bank loan.
Although paying to get your credit score can be a bit of a bummer, it’s important to check your numbers on a regular basis. The information bureaus use to calculate business credit scores isn’t always correct, and mistakes can have a negative impact on your ratings. You want to catch and dispute these mistakes as soon as possible to clean up your report!
If your report is error-free but you still want to see higher numbers, you can boost your score by:
Remember that some types of business financing also take personal credit into account. Be sure to follow these same principles with your personal finances to improve your FICO score, too!
When it comes to qualifying for business financing, different lenders have different parameters. For some types of financing, personal FICO might be crucial. For others, your business credit score might hold greater weight.
But even when your business credit is in question, the score might not be all that the lender examines.
After pulling your business credit report, some lenders may look closer at one particular aspect, rather than the score as a whole. Particularly, many lenders are only interested in your payment history, which speaks the loudest about your trustworthiness.
A low credit score often bars you from getting a bank or SBA loan, which can make it hard to push through a slow season or invest in growth.
The Business Financing Advisors at National Business Capital understand not every business has perfect credit. That’s why many financing options require no minimum credit score and other financial factors are taken into account when determining eligibility. If you need funding fast but your credit score isn’t exactly where you want it to be right now, National can help.
National Business Capital helps entrepreneurs secure quick and fair financing to save time and cultivate sustainable growth.
Our stress-free online platform is designed for simplicity and speed, helping business owners go from application to approval in a matter of hours. And while we remain a leader in the Fintech industry, our clients agree it’s our personalized service and award-winning team that sets us apart.
From SBA loans to lines of credit, to equipment financing, and more, business owners can access all the different financing programs available to them in one place. Through our streamlined process, we have helped clients secure $2 billion in financing since 2007, and, more importantly, we’ve helped entrepreneurs save a tremendous amount of time and grow faster.
Joseph Camberato, CEO of National Business Capital, developed a passion for business at a young age. Joe started his company in 2007 in his spare bedroom and has grown to secure over $1 Billion dollars in financing for small business owners nationwide. National’s team has an amazing culture and has been name the #1 Top Workplace on Long Island 3 years in a row and counting. Joe is a trusted financial expert who’s published more than 2,000 articles in the last 3 years. His articles have generated over 5 million page views and has been featured on blogs such as Google News, Yahoo, CNBC, Forbes Magazine, etc. His passion has also inspired him to build the "GrowByJoe” YouTube channel where he shares his insights into small business trends and tips for growth. Joe also holds a seat on Forbes Finance Council and is an active member of the Young Presidents' Organization (YPO), a global leadership community.