Building a rock-solid business credit profile is likely to increase your available options to get the financing your business needs. When combined with sound business practices and a healthy business, a strong business credit profile can open doors to additional financing options. The first place to start is to find out your business’s existing credit score. OnDeck’s free Know Your Score tool provides an easy way to check this.
So, what is your business credit profile? How is it determined and how can it affect your ability to receive finance? Let’s find out…
How does it work?
Your personal credit score is universally expressed as a simple three-digit score. On the other hand, your business credit profile is different, as it is not described by the bureaus as a single score. Rather, the credit bureaus use a selection of scores and reports. These scores and reports are based on information collected from the public record. Together with your credit history, they use this information to create your business credit profile.
What’s included in your business credit profile?
Now that you know how your business credit profile works, it is important to understand that the following information is contained in your credit report:
General information about your business. This includes your address, your industry and other information that would be filed with the state/city where you do business.
Information about the credit relationships you have with your suppliers.
Your payment history with any current business loans and/or business credit cards.
Lenders and other creditors look at information reported to the credit bureaus. They use this information to try determine what you might do in the future, based upon what you’ve done in the past. As a result, this can make it difficult to overcome a less-than-perfect or non-existent credit profile overnight. Keep in mind, it takes time to build a strong profile.
Your Personal Credit Score and Business Credit
Your personal score is a representation of how you handle your personal credit. In saying this, many lenders will look at it to help determine if your business is a good candidate for financing. Therefore, it’s important to understand how your personal score is calculated. From this, you can focus on building or maintaining a good personal score.
However, keep in mind that it might not be a guarantee that you’ll get the small business loan you’re looking for. Fortunately, you can start building a solid business credit profile today by following these steps.
- Make Sure Your Profile is Accurate
Illion (formerly Dunn & Bradstreet) and Equifax are the major credit bureaus in Australia. They are motivated to ensure the data they have on your business is as accurate as possible. To do so, they offer a ‘dispute process’. With this, a business owner can make corrections to any verifiably inaccurate information. For this reason it’s worth forging relationships with the credit bureaus. In addition, you should periodically verify the information they have about your business to make sure it is accurate.
Keep Your Business and Personal Credit Separate
It might be a challenge for a start-up business owner to avoid using their personal credit in the very early stages of starting a business. Although this is often the case, it doesn’t help you build a strong business profile. Ultimately, your business credit profile is what will help the business access finance. If you, as a business owner, use your personal credit for large business expenses, it can become a negative factor on your personal credit score.
Establish Trade Accounts with Your Suppliers
Additionally, one of the best ways to start building a strong business credit profile is by leveraging 30- or 60-day payment terms with suppliers. For the most part, the credit is relatively easy to get. Sometimes, it’s as easy as asking, “Do you offer payment terms to your good customers?”. By building one or two trade credit relationships a year, you can build a strong business credit profile that will make financing easier down the road.
Maintain a Positive Relationship with Your Suppliers
Once you’ve established those trade relationships, make sure you meet the agreed upon payment terms. In addition, it is just as important to maintain an open flow of communication with your suppliers. This will help keep your trade relationship positive, which can be helpful when the bureaus assess your business’s creditworthiness.
Use the Credit You Need and Stay Current
Your business credit profile is a reflection of how you’ve used credit in the past. So, avoiding business credit altogether could make it difficult for your business to access financing. For this reason, using credit responsibly as you need it is part of building a strong profile.