It's hard enough to qualify for a small business loan, and even more difficult if your personal and business credit rating is struggling. If you have a business credit card or have taken out a business loan or line of credit, you have a credit rating. Now, here's what you should know about it.
3 Major Credit Reporting Bureaus
There are three major credit bureaus from which you can learn your business credit score. None offers the information for free, but it's still a good idea to check about once a year to know where you stand.
- Dun & Bradstreet: Credit reports that show a range of information, at a range of costs from $69-$188. If you don't already have a D&B D-U-N-S number (required if you are going after Federal government contracts or grants), you can get one for free. Dun & Bradstreet produces the most commonly used business credit score, called the Paydex Score. It ranges from 0-100 (100 being best). Shoot for at least a 75 rating.
- Equifax: Provides analytical solutions, financial, consumer and commercial data, Equifax credit ratings start at $99.95.
- Experian: Build small business credit ratings, check your credit report and monitor your credit rating using Experian's small business-specific services. Base price is $36.95 to get started.
Analyzing your credit report can help you ensure you're not a victim of fraud or identity theft, that there aren't mistakes in your credit history or that there isn't outdated information that might be affecting your score.
3 Ways to Improve your Business Credit Score
1. Analyze your financing and credit. You should know how much you owe, and to whom you owe at all times. If you don't, get organized and look at how your business is borrowing and spending. Finance your capital items like equipment, fixtures, computers or physical plant-related spending. Your day-to-day spending, like rent, salaries, utilities and supplies should be paid using the working capital when possible.
2. Practice healthy credit habits. If you separate your personal and business credit, your personal assets won't be at risk. Get a baseline of your business credit and move forward from there. Pay down debt to improve your credit worthiness. Do whatever possible to reduce your debt-to-income ratio and make payments on time.
3. Maintain good business relationships. If you intend to apply for a loan at some point, know that banks will likely ask for referrals from business partners, customers, and/or suppliers. Pay on time, actively collect on your invoices and set a high bar for positive business practices.
Businesses struggle with credit now and again, as markets change; as they re-assess customer needs and buying trends; as they re-position themselves in their market or invest in new technology or other improvements. Making smart decisions, cutting expenses where necessary, and seeking alternative options for short-term funding are all possibilities in the quest to improve your small business credit rating.