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Aug 2016

What is a business credit score?

August 11, 2016
Capify Australia

How much  do you know about your business’s credit score? If the answer is “not a lot,” you’re not alone. Entrepreneur magazine reports that less than 10% of all business owners understand how their business credit score is established. If you want to access business funding – be it a small business loan or line of credit or more flexible payment terms, it’s important to understand your business credit score.

What is a business credit score?

Creditors are increasingly using business credit scores as part of their assessment process when making lending and credit decisions. As your business applies for and receives credit, a business credit score is established. That score will then act as a tool for credit providers to use when assessing whether or not you are approved for business credit.

A good business credit score can lead to lower financing costs on loans and enable your business to qualify for better credit terms. Similarly, a negative business credit score can potentially result in higher interest rates and lower credit limits for business funding.

A business credit score is established by the information in a business credit report. The information in the report is gathered from a variety of public and private sources by credit bureau agencies such as Veda and Dunn & Bradstreet. The report may include:

  • A Business summary
  • Payment history
  • Public filings such as judgments and bankruptcies
  • Financial statements
  • Small business owner relationships and/or guarantors associated with the business
  • Credit limit recommendations
  • Scores predicting likely business failure or late payments
  • Industry payment benchmarks

Remember, it’s important to understand what a business credit score is. This information may boost your ability to obtain business funding, increase credit limits and receive more favourable finance terms. In our next bog we will discuss the role business credit scores play in the business funding application process.

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