Owning a business can be incredibly challenging and at times difficult. However, one way to make owning a business easier is to have a healthy business credit profile. Just like personal FICO scores, business credit scores can open the doors to many new opportunities and options. And even for those who do stay on top of their business credit, there are some important aspects that are often overlooked or misinterpreted.
Every business owner should know these helpful facts:
SBA lenders look at business credit scores & the owners FICO score
Many assume that the SBA uses only personal FICO scores for business loan approvals. In actuality, the SBA also uses something called a FICO Small Business Scoring Service (SBSS) for their loans. This score calculates both personal AND business data to screen through SBA loans. So, business owners should be watching their personal and business credit if they want to qualify for these valuable loan services.
Business credit is used for more than loans
While business credit does have a huge impact on funding, it can affect much more than that. For one, business credit is a big deal when acquiring new contracts and accounts. Many companies, especially bigger ones and government organizations, will check credit scores (usually D&B’s Paydex scores) before doing business with a new company, and turn down businesses with poor credit or contract the one with the best credit. Suppliers may also give better rates to businesses with a good (80+) Paydex score.
Business credit can be ruined by a business with a similar name
A pull of a business credit report is essentially done by searching through a giant credit database and finding matching records of the company’s’ name and location. So, it’s commonplace for the credit bureaus to mix up similar businesses. For example, “Bob’s Construction Co.” in California could be confused with a nearby “Bob’s Construction Inc.”. Even if “Bob’s Construction Co.” pays all their bills on time, they could have late payments from “Bob’s Construction Inc.” on their report. That’s why it’s important for business owners to watch their credit, and to invest in a credit monitoring service with a professional credit expert team.
Business credit can be checked by anyone
Unlike personal credit, there isn’t any consent needed to check a business credit report. Anyone can go online and order any businesses’ report for a small fee. This means that potential new clients can see a businesses’ credit without them knowing, so it’s very important to stay on top of credit scores.
Banks can see delinquent accounts
Banks and credit unions have access to a special data-set for businesses that is only shared between them. While suppliers and other businesses can only see non-financial institution credit data, a bank can see every delinquent account for a business. This can make a huge difference for bank loan approvals and rates.