According to the National Small Business Association’s December 2015 economic report, more than one-in-four of small business firms cannot access adequate financing.
With little transparency surrounding business credit there is a lack of information provided to small businesses about their business credit score and the steps they can take to grow, fix, and monitor it. Business credit is not regulated; it can be accessed at anytime, without the business owner’s consent or knowledge. This should be of great concern to business owners since decisions can be made about their future success without their knowledge. If a lender, creditor, or vendor views a Dun & Bradstreet, Experian, or Equifax business credit profile, and they don’t like what they see they may chose to deny funding, increase pricing, or partner with a different supplier/business. You may never know why you were denied or rejected since the lender or decision maker is not obligated to disclose this information to you.
Some well educated business owners know that having a strong business credit score is crucial to gaining access to capital, but they do not understand what they need to do in order to establish and secure their score.
Approximately one-in-five small businesses say that a lack of funding has hindered their ability to finance increased sales. (NSBA 2015)
Eventually, every smart business owner will utilize financing and credit in order to grow their business – this is why building a strong credit profile is so important and will help prove that your business is strong and healthy. Opening new accounts and gaining partnerships help to build profits and move your company forward. Potential and existing accounts and partners must make sure you are reliable and financially stable since their profits and future growth may hinge on your ability to deliver products or services. Having the best business credit can show potential accounts and partners that your business is the right choice.
As a business owner it is important to educate yourself on factors that can have a positive and negative effect on your business scores.
Be aware – when applying for a business loan your personal credit score can impact approvals or the rate you are given (see FICO SBSS Score). It’s important that you obtain up-to-date business and personal scores; stay on top of monitoring both profiles, any needed improvement should be done immediately.
The first step is to view your business credit profiles, scores, and indexes. Check the report for accuracy. If you do not have a business credit profile you must register to get one. Your business must be a legal entity before you apply for a credit profile. Although you may have vendors and creditors it does not mean they will report your trade lines and history to the credit bureaus. Data errors and mismatched information can affect your credit score including, but not limited to, your address, number of employees, and business type. Your payment history, debt ratio, and length of credit can weigh on the scores/indexes as well.
In the US, over 90% of all firms are small businesses. If you work with them or you’re one of them, and have specific questions about credit feel free to reach out to us for a free credit review so we can give you insightful feedback and evaluate whether you are a candidate for credit repair, monitoring, or building. #businesscredit #smallbusinesslending #businessloan #buildingcredit