How to grow up your business
When applying for a small business loan, your credit score is a major factor in determining whether you get approved. So entrepreneurs with bad credit can benefit from taking steps to boost their business’ ratings.
According to Experian, one of the United States’ three credit-reporting agencies, a credit score is a number that lenders use to help decide how likely it is that a loan would be repaid on time. In addition to the role these numbers play in the approval process, credit scores are also used to set the interest rates on the loans that lenders do pass out.
It is important to note that a business’s credit score is different from a personal credit score. According to BusinessLoans.com, a personal credit score is a reflection of how someone repays their mortgage, auto loans, or other personal obligations, while a business credit score reflects how a business owner meets their company’s financial obligations. While the two scores are different, lenders can look at both when deciding whether to approve a loan.
“Having a positive business-credit profile is extremely important because it presents a current, objective picture of how a business manages its financial obligations,” Brian Ward, vice president for Experian’s Business Information Services, told Business News Daily. “A negative credit profile can lead to higher interest rates, difficulty in securing loans and potential problems with suppliers, but a positive business credit profile can help save your business money by enabling the business to secure the best possible rates and terms.”
Recent research shows that most business owners are in the dark when it comes to their credit scores. A study from Manta and Nav revealed that 72 percent of small business owners don’t know what their credit score is and nearly 60 percent don’t know where to find their credit score.