Understanding, Accessing, and Building Your Business Credit Profile

Similar to your personal credit, maintaining good business credit is fundamental to growing and protecting your business. In today’s high growth market the competition for attention and resources is fierce. With over 14.8M new business applications filed between 2020 and 2022, a 45% increase over the previous 3 years, there are way more businesses fighting for the same resources. Having access to credit can mean the difference between business growth and stagnation. In order to succeed and beat out the competition for capital one of the key components is maintaining a good business credit score. 

What’s more, the pandemic has shown us that small businesses remain dangerously vulnerable to revenue shocks, with many businesses disappearing during the pandemic and others only surviving due to government support. And even though small businesses were hit hardest, they supported a vast majority of consumers and employees during the downturn. Highlighting that robust business credit and sufficient credit access for small businesses are not only essential to their survival but also essential for a resilient country. 

What Is Business Credit and How Is It Used

Business credit is important for small business success. It is a financial tool that assesses a company's financial health and ability to repay debts. Business credit is distinct from personal credit and is associated with the company rather than its owners or founders. Business credit data is collected and scores created by credit reporting agencies. 

But who is looking at your business credit? The short answer is just about anyone you’re doing business with could potentially be looking at your business credit. Banks and lenders are the most common, but many others could be reviewing your business credit (communications providers, utility companies, and insurance providers to name a few). Maintaining good business credit is important when working with these lenders and service providers.

Good business credit potentially means:

1. Access to Capital: Business credit plays a pivotal role in securing financing for small businesses. Whether you need a loan, a line of credit, or investment, lenders and investors often review your business credit profile to assess risk. A strong business credit score increases your chances of approval and may even help you secure better terms and interest rates.

2. Vendor Relationships: Strong business credit can lead to favorable terms with suppliers and vendors. It can result in extended payment periods, discounts, and improved relationships. A solid credit profile demonstrates trustworthiness in your financial commitments.

3. Insurance Premiums: Business insurance premiums can be influenced by your credit profile. A good credit score may help you secure lower premiums, which can reduce your overall operational costs.

4. Business Expansion: Expanding your small business often requires financing. Whether you're opening new locations, launching new products, or investing in equipment, a positive business credit history can facilitate these growth initiatives.

5. Competitive Advantage: A strong business credit profile can give you a competitive edge in the market. It demonstrates stability and reliability to potential partners, customers, and investors, enhancing your business's reputation.

Optimize Your Business Credit

In the competitive landscape of business, understanding and optimizing your business credit is a critical step toward achieving financial success and stability. Accessing and comprehending your business credit reports and scores allows you to make informed financial decisions, secure better financing terms, and foster positive relationships with suppliers and vendors. Furthermore, by actively managing your business credit, you can optimize your creditworthiness, paving the way for growth opportunities and a stronger position in the market. 

In 2023, Credit Jet, a fin-tech resource for small business owners, partnered with us to democratize business credit and put the powerful scores we created into the hands of small business owners. With a shared mission to empower small business owners from every background, Credit Jet combines free, accessible credit reporting and tailored business credit education. Powered by Equifax commercial data assets and B2B solutions, Credit Jet helps Small businesses become the thriving, financially resilient businesses of tomorrow. 

Together, we have put together the following recommendations to help business owners access, understand, and ultimately optimize your business credit:

1. Check Your Business Credit Reports: Start by obtaining your business credit reports from the major credit bureaus. Companies like Credit Jet can be a great option for affordable access and education.

2. Review Your Score for Accuracies: Review your scores for accuracy and completeness. Make sure all the details match your records and dispute any inaccuracies promptly.

3. Monitor Your Score Regularly: Monitoring your business credit score is essential. You can subscribe to credit monitoring services or check your score periodically to track changes.

4. Establish Credit Relationships: Open business credit accounts, such as business credit cards and use them responsibly. Timely payments and responsible credit utilization positively impact your credit score.

5. Pay Bills on Time: Ensure you pay your bills, including loans, invoices, and credit card balances, on time. Late payments can have a detrimental effect on your business credit.

6. Build a Strong Credit History: Building a strong credit history takes time. Consistently manage your finances, avoid over-leveraging, and demonstrate responsible credit management. 

Conclusion

Understanding and accessing your business credit is not just a financial responsibility; it's a strategic move that can shape the future of your small business. A strong business credit profile opens doors to financing, vendor relationships, and competitive advantages that are vital for growth and success. By taking proactive steps to manage and improve your business credit, you are investing in the longevity and prosperity of your business. Don't wait until you need financing; start building and monitoring your business credit today.

Sources:

SBE Council Facts and Data on Small Businesses 

Forbes “Small Business Statistics Of 2023”

Equifax “The Role of Credit Access in the Small Business Recovery”