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Credit Score Impact on Small Business Financing Options

There are many reasons why you should stay up to date on the status of your small business credit score. It’s important to ensure there are no errors or indications of fraudulent behavior, but your credit score also plays a role in small business financing, business insurance, and payment terms. Essentially, your credit score determines how “credit worthy” you are and tells banks and lenders how likely you are to repay (and pay on time).

How Business Credit Scores Are Calculated

Credit bureaus gather your business’ payment information from vendors, banks, and credit card issuers to determine your payment history, the size of your business, your credit utilization ratio (which is the percentage of available credit on any loans and lines of credit compared to how much credit is used), and risk of failure.

The score that you are given is dependent on your past payment history and your risk of late payment on future loans. A higher score is better — this tells lenders and banks that you are at a low risk of payment issues and are likely to pay your bills on time.

How to Access Your Business Credit Score

There are three primary business credit bureaus: Dun & Bradstreet, Experian, and Equifax. Each credit bureau assesses your business by different scores and indexes.

  • Dun & Bradstreet — Paydex score, failure Score, and delinquency score
  • Experian — Business credit score, and financial stability risk rating
  • Equifax — Payment index, credit risk score, and business failure score

Through Dun & Bradstreet, you can access a free report that gives you limited access to four key scores, or you can pay an extra fee per month for unlimited access. An Experian CreditScore report costs $39.95 per report online, or you can subscribe to their Business Credit Advantage plan for $189 per year that provides unlimited access, monitoring, and alerts. Equifax business credit scores are only available to businesses applying for a loan or credit card, but it is free as well.

How your Business Credit Score Impacts Your Financing Options

When you have a higher credit score, lenders are more likely to offer you larger loans with favorable terms and lower interest rates because they believe that you will be able to stick to the repayment plan agreement on time and in full. Lower credit scores will increase your interest rate options and may even get you denied a loan or line of credit.

If you want to improve your business credit score, first make sure your credit information is accurate and up to date with each of the credit bureaus. Be sure to upload the most recent financial documents as changes to your cash flow or debt amount can help improve your score. You also want to ensure you are paying your bills on time every time, so if you have a history of late payments, streamline and automate your payment process. You can also consider consolidating your debt which allows you to combine your higher interest loans under a new loan that will likely have a lower interest rate.

Have Questions? Ask Us!

Navigating small business credit scores can be a bit dizzying at times, but if you are unsure of how your credit score impacts your financing or want to ask questions on how to improve your business credit score, reach out to one of our professionals at Republic Bank. We have everything you need to keep your business in good shape and help you secure loans and lines of credit that are right for your business. Give us a call at 800-526-9127 and visit our library of resources for other helpful financial tips.

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