What’s a business credit score and what affects it?

There are different ways to get funds for your small business. If you are an owner of the company, then you’ve probably thought about the means to get more funds for the company. Even if you’ve lots of savings and can manage the business for a long time, there would be a time when you’ll be in need of extra money.

whats a business credit scoreWe won’t talk about the methods and ways to get extra funds. Today we will talk about the business credit score – the backbone of gaining access to extra money.

What’s a business credit score? – Simple explanation

A business credit score is a simple number that estimates your chances of getting funds (credit, loans, etc.).

Small business owners mostly underestimate their credit score. They don’t understand that that particular time will come when business will be in need of money. What is it so important? Any supplier or a partner company looks at your businesses credit score before offering you their services and terms.

Banks and other financial institutions always rely on your businesses credit score before creating a line of credit. So, if your company lacks a credit score (or it has a lower than expected), then you may face serious issues.

Even if you are personal credit score is very trusted and authoritative, your business may still face issues with lower credit score.

Personal vs business

The system itself could be the resembling, but both types of credit score have unique algorithms. For example, personal credit score varies from 300 to 850 meanwhile business credit score number could be anything between 0 to 100. The average businesses credit score is 75. When this number goes down, financial institutions won’t be happy to cooperate with you.

Banks, lenders, and other institutions depend on credit score algorithm, and if your business fails at it, you won’t be successful in using their financial tools.

You can check your credit score quickly with hundreds of free tools. As for the business credit score, few sources give you a chance to see it. For example, you can check my business credit score here.

Primary factors that influence your businesses credit score

Business assets – If your small business has assets such as vehicles, buildings, and business equipment has a significant influence on credit score.

Business revenue – If your business is doing good and has expected revenues at the end of quarters and business year, then business credit score gets better.

Debts – Most of the small businesses have loans and credits. That could affect your businesses credit score in both ways, negatively and positively. If your liabilities exceed your revenue, then the credit score can go down.

Credit history – It’s not easy to calculate your credit score yourself. Everything related to the business process is included and affects a score. What was the value of your past business loans and credits? Even business problems could affect your credit score. When a company can’t deal with credit, it will eventually transform and lower your credit score.