Applying For A Business Loan? Then You Need to Know Your Business Credit Score

  • If you’re applying for a business loan, then you need to know your credit score.
  • What’s a credit score, also known as a credit rating?
  • It’s a simple number between 0 and 1200.
  • It represents how solid and worthy your credit is.
  • It can change with time, for example from month to month.
  • It’s calculated using your credit file.
  • Both personal and business credit scores are important factors for approving business loans
  • If you use credit cards to fund your business, an excellent personal credit score will be essential for obtaining a loan.
  • Personal credit scores can include information such as your age, length of employment, how long you’ve been at your current residential address and how many applications you’ve made for credit.
  • If you want a more traditional business loan, your business credit will also impact the approval.

What impacts your business credit score?

  • So, how do they come up with the credit score?
  • The most important factor is whether you pay your bills on time.
  • If you have any late or missing payments on your credit file, this will have a very large impact on your credit score.
  • Another factor is how much other debt your business has: less is better.
  • And yet another factor is how long ago your business was set up: the longer the better. Most lenders require you to be in business for 12 months, but to get a larger loan, you may be required to have been around for at least 2 years.
  • Are you applying for other loans at the same time? Any other loans you have applied for will appear on your credit report: the less the better for your score and being approved for a loan.
  • A slightly more complex issue is the types of other debt you have. It’s important to have a mix of debt. So, if all your debt is short-term, this can negatively affect your score.

How lenders use your business credit score

  • Lenders will look up your business credit report any time you apply for a business loan.
  • Business credit scores are provided by agencies such as Veda and Dun & Bradstreet.
  • They are interested to see that you pay your bills and other loan payments on time.
  • They’ll use the score to assess how much to loan you AND at what interest rate.

So, those are the reasons why you need to know your business credit score, and a bit about how credit scores work. If you want a new business loan, or are looking to get a better deal on a current loan by refinancing, you can apply with Merchant Cash. We’re always happy to help.