The Benefits of Having a Good business Credit Score
When you own a small business, you must build a good business credit score. This is important because of the reason as to when you start your own business, and you might not have enough cash on-hand to cater to every business expense. These expenses are inventory, equipment, marketing, payroll, and much more.
You will need a good business credit score on th off chance you need to apply for financing to manage the necessary expenses. Most lenders in the business field will prioritize seeing your business credit score, as after seeing that score, they will determine your credit period or loan application. So you must improve or keep up a good business credit score, contingent upon your present monetary standing.
Even though you do get your financial application accepted with regards to a low credit score, there is a high chance that you would receive it on significantly worse terms in contrast to those businesses that have a good business credit score. As a result of low credit, the finance you will receive has high-interest rates, and most of your profit, if not reached as predicted, could be very harmful to your business in the long term.
What is a good business credit score?
Before we get into the benefits of good business credit score. Most business scores are in a range from 0-100. There is a different category in this range, and many various organizations have their credit scoring system. Here are some of the business credit reporting companies which are reported by the team of Ghostwriting Services
- Experian: if you find out your business credit score from this company, they have two types of ranges as the first one is from 1-10 and the second one is from 76-100. If your business credit score lies in the first range, you have a high-risk credit score, which is an alarming thing relating to business. However, if your business is in the second range, your company has a low-risk credit score, which will positively affect your business credit score.
- Equifax: The scoring system of this company the different from other companies. The first one is the traditional credit risk score, in which there is a range of 100-992, and this system gives an overview of your business credit history. The second one is the payment index, ranging from 0-100, which tells about your payment history. If you have paid off all the expenses on time and take care of all your finances, your score will be near 100. And finally, the third one business failure score. The scoring is between 100-1000, and this is done when a business is being dissolved or transferred.
- FICO SBSS:If you apply for bank finance, your credit score should be high in FICO SBSS. The credit score range is from 0-300, and at least your score should be above 160 to attain the bank finance.
Dun & Bradstreet PAYDEX:This has a credit score range of 0-100. It is essential that if you want credit on reasonable terms, your PAYDEX score should be 80-100. As if it will lay in the range of 0-50, it will be difficult for you to get finance.
The benefits of good business credit scores:
- Applying and getting a loan would be more straightforward: One of the most significant advantages of having a good business credit score is that you have ease when you apply for finance from a lender. Lender hesitates to lend money to those small businesses that have a poor credit history as the only reason that those businesses will not make their payment on time, or they might also not pay at all. Apart from this, even small businesses having a good business credit score can get finance painlessly and quickly.
- You will receive better credit terms: Naturally, the lender will prefer to give a better credit return period to companies with a good business credit score. Like, if you have a small business with a great credit score, you can credit on a lower interest rate and more credit return period. Having better credit terms can be useful for your business when you have lower interest rates. Your expenses will be reduced, and a more extended credit return period will also help save profit. So it is a win-win situation.
- It protects your personal finances: When you start a new business, it is likely to be a sole trader or partnership form of business with unlimited liability. This means that if you cannot return your loan, your personal assets might also be used to gather the loan money. Having a good business credit score will help you assure that the lender might not need to acquire your personal assets.
- You will receive better terms from suppliers: Once you have a good business credit control, it helps you get finance from the market and helps in terms of increasing credit terms given by the suppliers. Like, when you decide to purchase additional machinery for your business on credit. So if your creditor trusts your business’s financial stability and that you are capable enough to repay your payments on time, they would be more comfortable lending you the machinery on credit.
- Get access to cash for expansion and growth: Even if your business is now financially stable and you are meeting all of your expenses without a credit. So it is time for growth and expansion. As when a company is expanding, there are always more costs incurred than projected. So what to do in this case? Having a good business credit score will help you get instant cash from lenders if you fall short of money during expansion.
In the end, I would like to say that there are benefits of having a good credit score whether you have a small or newly started business or your business is already established and you knew to expand your business. In both terms good credit score is essential.