5 Reasons to Build Strong Business Credit
When you’re looking for business financing, having a high business credit rating will help you get the money you need.
Many business owners use personal credit to fund the start-up stage and growth of their company.
However, building strong credit for your business separate from your personal credit is important if you want to:
Increase your borrowing power
Negotiate lower interest rates
Negotiate better terms with suppliers, creditors, and banks
Protect your interests
Quality to bid on new contracts
Unfortunately, many owners don’t check their company's credit rating until they need to obtain financing.
The challenge is building credit takes time. So, being proactive is necessary whether you need capital for time-sensitive requirements, short-term goals or an expansion project.
What is an Excellent Score?
Banks, suppliers, and other credit grantors analyze your business credit report and score to evaluate risk. Business credit scores can range from 0 to 100. The higher the score, the lower the risk (see references). A score over 75, is considered healthy and over 80, is excellent.
Primary Reporting Agencies
The primary business credit reporting agencies for Canadian small to mid-size businesses are:
Dun & Bradstreet
Equifax
Experian
Check Your Business Credit Report
Contact each agency to clarify whether they have a file on your company and get your business credit report. If necessary, identify how to start a file, update an existing one or report and fix any errors you find. There may be a cost to getting your business credit report and monitoring its’ score, but it’s an investment in building your borrowing capacity.
What Influences Your Business Credit Score?
Agencies can gather information about your company’s structure, history, financial resources, payment habits and financial reports over time to create a business credit report. The factors and trends, which can influence your business credit score can include (see references):
Payment history and banking data from vendors and credit grantors
The number of trade and creditor accounts
Reporting frequency
Credit use and credit limits
Financial statements and business reports (Eg. balance sheet items such as net worth, working capital and cash flow)
Company registrations and filings
Third party collections, claims, liens, legal suits or judgments
Additional information gathered about your business through interviews or investigations
Building strong business credit doesn’t have to be difficult. You can work with us or your bookkeeper and accountant to create a step-by-step action plan to build your business credit.
The key is to start making building strong business credit a priority so you can use it is a powerful asset to get the best rates and terms for financing when your business needs it.
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References:http://www.experian.com/small-business/build-business-credit.jsp
http://www.dnb.ca/contact-us/guide-to-dnb-credit-rating-scale.html
http://iupdate.dnb.com/iUpdate/whatAre4Cs.htm”