Business credit scores are the business equivalents of personal FICO scores, and are just as important. As with consumer scores, business credit scores play a big part in determining whether financing of all types will be approved. In today’s economy, credit scores and indexes can be the difference between a company’s ability to fail or succeed. Business credit is an asset that should be cultivated, maintained, and used to bring more opportunity and growth to a company.
Here are some of the benefits of a healthy business credit profile:
● The ability to grow a business and get new financing through equipment leasing, business loans, factoring, credit extensions, and more.
● Huge savings. Healthy scores allow for approvals and can also bring the best interest rates and fees on loans, leases, and credit extensions. Companies can use their new improved scores to refinance existing loans.
● A winning edge over the competition. Companies are often judged by their credit score, and a healthy one reflects a financially sound and successful business. This can make the difference when competing for a bid/contract or acquiring a new business-to-business customer.
The most important score for a business is the Paydex score, which is from Dun & Bradstreet (D&B). The D&B Paydex Score ranges from 1 to 100, with higher scores indicating a lower risk business. Although D&B is the oldest and most popular business credit bureau there are two others. Experian and Equifax both provide business credit reports to vendors, lenders, creditors, and potential clients. These bureaus have their own ratings and although they are not as popular as D&B they are used by some banks and vendors.
Unfortunately, one late payment on the wrong account or a collection account for a specific debt listed on a business’s report can drop a score by 40-plus points. This will immediately place a company into the high risk category, and can cost hundreds of thousands in lending fees as well as hinder new business. In addition, many vendors, lenders, and creditors do not report to the bureaus for business credit, so a business may have limited credit even if they have been making on-time payments with a variety of accounts.
Tracy Becker President
North Shore Advisory, Inc.