If you’re trying to obtain commercial financing for your company, you may have already discovered how your business’ credit score affects your eligibility and terms. As a measurement of your company’s creditworthiness, a high credit score can help you secure the best financing options for your business. But did you know that there are also other benefits to improving your credit?
In this article, we’ll outline the benefits of having a higher business credit score and provide tips to improve your business credit. However, if your business’ credit score isn’t where you would like it to be, don’t get discouraged. At Team Financial Group, we’ve helped businesses from all types of circumstances and at all stages of growth secure financing, so you should never assume you can’t get the financing you need. To get personalized help, submit an application and talk with one of our commercial financing experts.
The Basics of Your Business Credit Score
Business credit scores work a bit differently than personal credit scores. So, before we dive into improving your score, we’ll go over the basics of business credit reporting.
- Bureaus: There are three main bureaus that provide business credit reports: Dun & Bradstreet, Experian, and Equifax.
- Scale: In addition to providing detailed credit histories for your business, these bureaus also rate your credit on a scale of 0 to 100, with 100 being the best possible score.
- Access: You will generally need to pay to view your credit rating and history.
- Privacy: Other interested parties can also pay to view your business’ credit report.
The Benefits of a Better Business Credit Score
Just like with personal credit, a higher credit score can open up a variety of options and help your business in several different ways.
With a High Credit Score, You May Receive Better Loan and Lease Offerings
Both banks and independent lenders will check your business’ credit history (and usually your personal credit history as well) during the commercial financing approval process. If you have a low credit score, some lenders might deny your application or offer less favorable terms. On the other hand, having a healthy credit score can help your business:
- Qualify for financing
- Obtain lower interest rates
- Receive favorable payment terms
- Pay lower insurance premiums
Bad Credit Can Hurt Your Business’ Reputation
Did you know that your business’ credit report is public information? Unlike your personal credit, your company’s credit history can be viewed by any potential client, vendor, or partner. A low credit score can hurt your company’s credibility, as it may suggest that your business is struggling or has been run irresponsibly. A checkered credit history can also affect your ability to obtain the necessary inventory or upgrade your equipment, and it can even affect the amount you pay for utility services.
4 Tips to Improve Your Business Credit Score
Your business’ credit score will change over time, and there are things you can do to improve your score if you’re not happy with it.
1. Make On-Time Payments to Existing Creditors
The best way to improve your score is by making on-time payments. All three of the business credit agencies place great emphasis on payment history and recommend paying on time or even ahead of schedule.
2. Decrease the Amount of Available Credit You’re Using
Do you know how much of your available credit your business is actively using? The credit bureaus do, and they analyze this credit utilization ratio when determining your score. As an example, increasing your credit limit or opening a new line of credit while expensing the same amount on your credit will lower your ratio. As a general rule, you should aim to use less than 15% of your available credit.
3. Increase Positive Credit Payments
If you already have a low credit ratio, opening a new credit account for a supplier or service you frequently pay on time can help increase the history of positive items on your credit report.
4. Correct Errors in Your Credit Report
Just like with your personal credit, it’s important to review your business’ credit history to make sure the information is accurate and up to date. If you see something on your credit history that shouldn’t be there, it’s essential to address it right away. You should be able to work with your creditors and the credit reporting agencies to remove inaccurate information that may be hurting your credit score.
Team Financial Group: Your Partner for All Your Commercial Equipment Financing Needs
At Team Financial Group, we offer flexible payment terms tailored to meet your business needs. Even if you have a low credit score, don’t get discouraged — our commercial financing experts are here to help, and we’ve been able to provide financing for businesses with all types of unique circumstances. Our application process is easy and won’t affect your credit score, so apply today to get started.
If you have any questions about our financing application process or which financing option is right for your business, fill out our online contact form or give us a call at 616-735-2393. We’d love to chat with you about your options.