Every small business owner should know her business credit score. Like a personal credit score, it can determine what kind of credit she can get. And in this day and age, credit can be an important asset to keep any business running at its topmost efficiency.
There are many credit information services that have built databases that contain information about small businesses. They have devised a system of scoring those small businesses that is similar to personal credit scores. As with an individual, that system takes into account a business's credit history and its record of repaying loans and paying monthly bills such as utility or coffee service fees. It tracks the business's outstanding debt and any collection activities performed against it. The system also tracks bankruptcies. It records how many employees a company has and the value of the company's assets. This information is usually provided by businesses that want to participate in credit scoring but it can also be harvested from existing credit reports and credit applications. Once compiled, the credit information services use all of this information to calculate the firm's business credit score-again just as they would calculate a person's individual credit score.
Many lending institutions like banks or private equity firms take advantage of these databases to determine whether or not they will approve any kind of financing or corporate credit for businesses that apply to them. They also use the business credit score to decide what interest rate to offer borrowers and what repayment terms to extend to them. In order to get a good deal on a loan, a business needs a healthy credit score.
Every business should monitor their credit scores to make sure that the information that formulates it is correct. In fact it should become part of any business's standard operating procedure to verify its credit report. This is as simple as periodically requesting a credit report on the business. A falsely low score could impact a company's ability to get financing for important business expansions or to buy inventory as well as to borrow money. So it's important for a business to learn its credit score and repair it if necessary before it needs to use it.
To learn what the business credit score is, as stated earlier, as simple as finding a personal credit score. Simply contact one of the credit reporting agencies and make the request. Usually this can be done online or by phone, and a small fee may apply. Make sure the report and the score are correct before requesting any type of financing. Incorrect scores can be corrected by working with the credit reporting services. This may take a little effort, but it is definitely worth it.
If the business credit score is truly low, the business must work to bring it up. This may require changes in the company's operating procedures and it may take time and even greater effort than correcting a falsely low score. Bills must be paid on time because payment history is one of the biggest factors in calculating the credit score. Outstanding debt should be reduced as much as possible. Too many credit accounts can also negatively impact the score so if there are unused accounts, it might be wise to close them. If all of that is not enough to positively impact the score, a business would be wise to consult with a credit repair firm.
A company's credit score is an important asset, and a reflection on the company's reputation.
Corporate Credit Concepts specializes in Business Credit Score. For more information about Business Credit Score and how it might benefit your business, please CLICK HERE for a free phone consultation.