For small business owners, a solid business credit score is vital to securing the loans needed to expand. Yet, as a recent Manta survey revealed, the significant majority of small business owners don’t know their company’s credit score. In a business climate where having a bad credit score can actively impede growth, it’s imperative for small business owners to know the basics of business credit—and how to build it. Surmounting the knowledge gap
Like personal credit scores, business credit scores are a concrete measure of financial responsibility—and they have significant implications for every small business. Without a solid credit score, small businesses may find themselves getting turned down for loans. And it’s not just lenders that vet business credit; suppliers and vendors are likely to as well—leading companies without good credit to lose customers and contracts. In short, a subpar credit score can prevent a business from remaining competitive in its field.
Despite the importance of business credit, most small business owners don’t know their scores. According to Manta’s survey of 2,917 small business owners, 72 percent of respondents reported not knowing their business credit scores. This knowledge gap exists across industries, from legal organizations to restaurants. To earn a competitive edge, businesses must learn their scores and follow strategic measures to build them up.
The three steps to building a great business credit score
Small business owners are a busy group with little time to spare. Building a good business credit score doesn’t have to demand much time. Here are three simple steps owners can follow to take control of their small business credit:
- Find your score: Before building business credit, you need to know where your organization stands. Small business owners can request their company’s credit score directly from reporting agencies, including Experian and Dun & Bradstreet. Alternately, owners can avoid any fees associated with these direct requests by identifying free services that provide access to business credit reports. Manta’s partnership with Nav provides business owners access to their credit scores from a link on their Manta business listing.
- Establish a business credit history: Once you find your score, you’ll know whether your business is in the low, medium or high risk category. One key reason businesses may find themselves in the high and medium risk categories is that they don’t have a credit history. Just as banks would hesitate to extend a car loan to someone who has never had a credit card, business lenders have reservations about lending money to small organizations that haven’t demonstrated responsible credit habits. It’s important to note that personal and business credit are two different and distinct scores. As a small business owner, you may have a great personal credit score, but if your business credit score isn’t up to par, you’ll likely find securing loans difficult. Therefore, work to separate business and personal finances, paying for business expenditures with designated business accounts or business credit cards.
- Pay early: Once you have a business credit card, be sure to pay off the balance as early as possible. Unlike personal credit scores, where it’s only important to pay by a certain date, business credit scores like D&B Paydex actually factor in how early you pay off a bill.
It’s not an easy market for small businesses these days. But by working to solidify a good business credit score, small business owners can take an important step toward establishing the credibility they need to stand out and thrive in a highly competitive marketplace.
