Are you planning to expand your business? Maybe you want to diversify or go international? Whatever it is you want to do with your business in the future, you will need a good credit score. Don’t be like many new business owners who choose to neglect their credit score and get surprised when they don’t get approved for a loan. When you don’t have enough cash to fund your needs, your business credit score will be a lifeline that will keep you afloat.
With a smooth business credit score, you can loan money for expansion and purchases of new machines, as well as achieve better trust with vendors and customers. The higher the credit score of your company, the better the benefits. What are the benefits you can enjoy thanks to your stable business credit score?
What is a good business credit score?
Before you start working towards elevating your business credit score, it’s important to understand what a good credit score means. There are different business credit reporting agencies today, the most popular being Experian, Equifax, and TransUnion. Scoring models usually go from 0 to 100. For instance, with Experian you want to find your business somewhere between 76 and 100—this is a low-risk credit score. On the other, Equifax uses three scores—payment index, credit risk, and credit report.
Easy loan approval
Benefits of having a good business credit score are plenty, most of them aiming at loan approval. With a good business credit score, you can get a small business loan almost immediately. On the other hand, if your credit score is high-risk, landers and banks will either force you to prove your value or they will simply not approve you for a loan. And who can blame them when they might never see their money on time or ever again. A business with a good credit score applying for a loan can get money quickly and painlessly and use it to grow its operation.
Better loan terms
If your business gets approved for a loan, you can expect great loan terms if you have a stable and high credit score. You can use your low-risk score to negotiate better interest rates and better credit limits that will definitely benefit your business in the long run. If you want to save money for your business, lower interest rates will definitely help. Businesses that struggle with their credit score can look into investing in an inquiry removal service that can erase repeated attempts to get financing. Why should you do that? Well, unsuccessful attempts of getting a loan can negatively affect your credit score by up to 100 points!
Better supplier terms
A better credit score can help your business not only with loans but also with suppliers. They will be happy to work with a responsible business like yours, as well as give you better terms. And that’s not all! Some suppliers are ready to allow stable businesses to purchase goods on credit. There won’t be the need to prepay for goods, allowing you to improve or maintain your cash flow.
Protection for your personal finances
It’s important to keep your business and personal finances separate, which is possible if you have a good business credit score. If your company is in trouble, it will show on your credit reports and maybe impact your personal credit rating (and vice versa). Make sure not to neglect your personal credit report while trying to separate your business from your private life, because some lenders will look into your business credit score when considering your private loan approval for buying a house or getting a new car.
Easier business planning
Making accurate financial plans and projections is crucial for growing your business, and this can only be done if you have a good business credit score. When you know that you can get loans, collaborate with suppliers and have the trust of your customers, it’s much easier to plan for the future of your business.
Easier selling of your business
There’s nothing wrong with selling your business—maybe you want to retire, change careers or try something different. And if you have a good business credit score, selling your business can be very easy and profitable. Potential buyers love risk-free investments that won’t make their lives a living hell.
It’s obvious that maintaining a good credit score for your business is crucial for your professional success. A well-built credit score will allow you to follow your career dreams and stay successful no matter what the future brings.
