A business credit score is akin to your personal credit score -
just as a personal score is a measure of personal creditworthiness, a business
credit score is a measure of your company’s creditworthiness. A business information report is used to
calculate a score that the financers refer to make business lending decisions.
Since businesses require huge capital, lenders seek to minimize risk as much as
possible. Since a business credit report is a decent indicator of business
credibility considering the various financial aspects it lists of an
organization, it forms an inherent portion of credit risk management in banks & lending institutes and helps them calculate their risk.
Recognizing the importance of a business credit score, let us ponder upon a few
apparent benefits that a company can gain by maintaining a good credit score.
- A Quick Pass
to Qualify for A Loan
The best advantage of having a good business credit score is that
you will get a premium treatment from the lender who will be more than
delighted to extend a loan to your company. On the other hand, you can really
struggle with a loan if you have a credit score of less than 700. Lenders are
naturally hesitant to pass a loan to someone with an unstable or poor credit
history, even though your current situation might seem better. It is a great
sigh of relief when you get through the difficult process of credit approval
with much ease. Any score above 750 is deemed as a good credit score for business loan.
- Secure
Better Deals
With a good credit score, you will not only get a loan, but you
will also be in a position to negotiate and get it at a good interest rate.
Better interest rates can save you a decent amount of money which you can pass
over to your customers to win more clients or simply put the excess back into
the business.
- Separates
Business with Personal Finances
Business credit helps you to separate and clearly define business
and personal financial obligations. You can obtain a business loan without the
need for a personal guarantee and your company debts will be reported only on
your company’s credit information report. This reduces your personal liability and shields your personal
assets. Alternatively, your personal spending patterns have no effect on the
business credit score. Of course, your personal credit report still holds
weight as the proprietor of a business. When you apply for a loan, lenders may
want to review your personal credit score for added credit risk assessment along with your business’s credit report.
- Build a
Strong List of Suppliers
Strong business credit will not just help you secure loans, it
will also get you into the good books of suppliers from whom you seek credit.
When your suppliers perform a credit check on you, they get to clearly see the financial stability in your
business and your positive track record of timely repayment. This makes them
more comfortable in extending credit to you.
