How does your company credit score affect your business?

Checking your company credit score is suggested time and again by the industry experts, and rightly so! It helps you analyze your financial standing in the market and how you can improve your creditworthiness.

If you’ve started a new business recently or own a small enterprise, you would know that the business credit is built over time. Many businesses, small or large, wait long enough to develop an accurate credit history, alongside a good credit score. It is because the lenders and credit reporting agencies check your company credit score and report to determine your financial capability to repay loans, in case they’re willing to lend you funds.

A business could be operational for years but still not have much business credit. It’s also possible that businesses may lack creditworthiness in showcasing creditworthiness, which could impact their company’s credit score. Lenders will use your company credit score to determine what types of loans can be offered to you, along with determining the interest rates and terms associated with the loans.

If you’ve got a bad company credit score, you’re likely to fall under the category of ineffective players in the market. Lenders may create an impression that you’re not capable enough to repay the dues on time, thus, making it difficult for you to avail of loan offers from trusted lenders. It is the same in the case of the investors – they may consider your poor credit score as a key factor in analyzing your company’s financial worth.

Apart from checking your company credit score, lenders may look at other factors while evaluating your request for a business loan. It includes your financial statements, the size of the loan requested, and the current debt-to-credit ratio. They may also check the cash flow of the business and request transaction details to analyze your business bank account.

How to build impactful business credit?

Many credit reporting agencies like CreditQ and others prepare your company credit report considering public records, business demographics, financial and trade payment history, owners and directors’ information, and corporate family trees. Besides, they take into account the guarantors associated with your business to determine your financial rapport in the market.

Building business credit history requires you to pay off your dues on time, keep your credit utilization rate low, and avoid unnecessary expenditure. As said earlier, it takes time to build a strong company credit score and credit history. As you grow your business and keep a check on your financial hygiene, it may turn out to a profitable idea for you – you’ll be able to generate capital with the best terms and rates. Besides, it saves you from financial crunch in case of bad times.

While you take all the stern measures to ensure that you make a powerful impact on your lenders, it’s equally important to call out your business defaulters so that you can save money and prevent fraud.

You can check your company credit score on the CreditQ app and list your payment defaulters simultaneously. It exposes the business defaulters and helps you settle your payment.