There are surprisingly many small business owners that are not aware they have a credit score and how important it is. Others have did not know where to look for information on its rating. Additionally, a huge number of small companies do not know how to interpret their score.
It is almost impossible to grow your enterprise without good business credit. Every venture gets to a point where it becomes necessary to borrow funds to facilitate growth. With good credit, getting funds should not be a problem. However, if your report is less than impressive, lenders may turn you down when you apply for funds.
A good credit note does the following for your business:
- Increases your business’s value
- Allows you to easily access funding
- Protects your individual credit
Business Credit Explained
It refers to an enterprise’s record of financial responsibility which is used to assess whether or not a company is creditworthy, and is calculated by agencies. There are a number of them and each one has its own method of calculating your rating.
The results are ranked from 0 to 100. If you are ranked high, say 80 and above, it means your finances are excellent. A small business owner must ultimately strive to maintain a credit score of at least 80.
Factors That Have an Impact on Business Credit
Public records can seriously affect your credit score. These include the following:
- Payment habits
- Outstanding balances
- Liens/ bankruptcies
- Demographics (size of the business, length of operation on file)
A Good Rating is Important
Boostcredit101 gives you information on why a strong financial standing is good for your commercial venture. For starters, it helps you to expand. The strength of your score is what lenders will look at first to ascertain whether your enterprise is good for the money or not.
Consequently, the following reasons are why you should monitor your solvency:
To Not Be Caught Unaware
As mentioned earlier, your business score is what lenders consider when you apply for funds. It dictates how much money lenders will give you as well as how much you will pay in terms of interest and insurance premiums. You should know before you put in an application for a loan what your finances look like.
To Correct Any Errors
Since so many rides on your enterprise’s financial strength, you must ensure that the information presented in the credit report is correct and updated. Incorrect information will affect funding, therefore, derailing progress as well as painting your business in a negative light.
To Protect Your Identity
There are always unscrupulous characters looking to steal identities and this can cost you a lot of money. You can also suffer losses due to fraud. The financial impact on your venture would send you reeling as cash flow would be affected. In addition, your professional reputation would be affected.
You should, therefore, check your credit report often for any suspicious activities that may be alarming.
To Increase Your Borrowing Power
Monitoring your financial rating allows you to catch a declining score which gives you time to build it back up. If you are aware of the factors that affect your creditworthiness, then you will be in a position to correct any anomalies. A poor financial standing makes it difficult to access funding for your company which in return slows down growth.
It is not only important to keep an eye on your business credit score but also to ensure that it is always ranked high. You will then have no problems accessing funds to grow your company and see your entrepreneurial dreams come true if the lender is convinced you are a worthy investment. Always ensure that all bills are paid on time and ensure your score is always accurate.