Do you own a small business and are interested in knowing ways to smart funding that can help flourish your business? In the process of successfully expanding and growing your business, it is important to understand how to calculate business credit scores, establish business credit, and how the funding is done.
But what is a business credit score and how to calculate it?
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This article is based on everything you might be wondering as a reader, which can include the following:
- Define A Business Credit Score
- Calculate Business Credit Score
- Business Credit – How to Build?
- The Bottom Line
Define A Business Credit Score:
The parameter that can help to measure the creditworthiness of an organisation is known with the name of business credit score. Certain elements are carefully factored in in this case, including the following:
- Financial stability of the company
- Credit utilization
- Payment history of the company
The highest credit score helps to pay the debts in time. This has a direct impact on the moment of applying for a credit card or bank loan. Often people confuse personal credit scores with business scores, but, they are two different ideas.
The range is a major difference that is prominent between both definitions. The score range of personal credit starts from 300 – 850. The requirement is to have a minimum of 600 scores as a lender if intend to go for personal loans.
Moreover, there are many sources by which you can access your credit score free but for business, the score is not free to view. It is important to note that the need to keep separate personal and business accounts is real to avoid negative effects.
For instance, if your business score is not good enough, this can negatively affect your credit scores as well.
Calculate Business Credit Score:
It is required to collect certain data which can further help to calculate the business scores. This data can be received through multiple resources. The details of the data are given below:
- Bankruptcy filing
- Industry statistics
- Creditor reports
- Registration documents of a business
- Tax liens
- Reports of business owners
- Legal filings
- Personal and business tax filings
- Incorporation Articles
Business Credit – How to Build?
The importance of having good business credit is real and can’t be denied especially for small businesses. To ensure that you establish a good score, the following steps will be helpful:
Registered Business:
The first need is to ensure that the business is registered and legal. Employer identity number EIN is equally important to get.
Business Account:
The business account and business credit card must be kept separately and used for business purposes only.
Timely Payments:
It is strongly recommended to make timely payments but if you pay before the deadlines that is an even better idea.
Debt:
Always go for the loan amount that is needed, in case you opt for more amount which will impact your business scores negatively even if you return on time.
Keep a check on your score:
It is better to keep track of your business score daily which will help you if you plan to apply for a business loan. Build and establish your business credit if your business is legally registered, we will do it in no time.
The Bottom Line:
Now that you have developed a better understanding of what is a business credit score, we can sum up the discussion by saying that it is essential to have a clear concept of business credit score for small business owners.
It takes time and constant struggle to establish good business credit, however, we hope that this guide helped to provide enough knowledge to get the process started at your earliest.
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Disclaimer: This article intends to provide general information based on everything you need to know about business credit scores.
