Many people think that business credit and personal credit are practically the same, but this is not the case. Sometimes it takes a business-savvy individual like Adil Baguirov to explain the difference in a way that the average person can understand.

Adil Baguirov is a business owner, so he is well aware of the importance of business credit, and he wants to pass along his knowledge to you. In this blog, AdilBaguirov will break down what business credit is, the factors that affect it, and why it’s important for businesses to build.

What is Business Credit?

Business credit is often time referred to as commercial credit and it is a number that indicates whether or not a company is a good candidate to do business with or lend money to. Much like personal credit, a company’s credit accounts and payment histories with lenders will determine its business credit score, as well as legal filings such as judgments, tax liens, or bankruptcy. How long a business has been in operation and the size of the company also factor into a business credit score that is on a scale of 0 to 100 (unlike personal credit which is a scale of 300 to 850). The closer a business’ credit score is to 100, the lower the lending risk.

How is Business Credit Calculated?

There are three credit reporting firms that calculate business credit: Experian, Equifax, and Dun & Bradstreet. When calculating a company’s credit score, these reporting firms take the following factors into consideration:

·       Credit accounts open

·       Repayment history

·       Legal filings (tax liens, bankruptcy, judgements, etc.)

·       Details of the company’s background collected from public records (size, years of operation, etc.)

·       Repayment performance relative to that of similar companies

This combination of credit, demographic details, and public records are what determine a business’ credit score.

Why is Business Credit Important to Build?

Most business owners understand the importance of having solid finances, but it is equally important for them to be aware of their company’s credit score. That’s because strong business credit actually improves a business’ financial potential. This not only improves a business’ finances and credit capacity, it also increases the value of a company overall. A business’ credit score is fully transferable at the time of a sale, so a company with a strong score will be worth much more to buyers if you ever decide to sell. Furthermore, strong business credit can allow business owners to get approved for small loans easier than they would be able to with their personal credit. If you’re a business owner hoping to increase your company’s credit score, be sure to make your payments on time, every time.

For more information about business credit of business in general, Stay tuned to this blog.