Are you a small business owner struggling to keep your business credit score up? We know how difficult it can be, especially if your business isn’t established yet. When the credit score isn’t looking good, small business owners find it hard to qualify for additional financing from funders.
In this quick read, we’re going to show you the different tips and tricks on how to improve a business credit score so that your small business can thrive in the industry.
The Importance of a Good Small Business Credit Score
Why is it even important to have a good business credit score?
As mentioned earlier, having a good business credit score means widening your chances of getting approved for financing from different kinds of funders. When the credit score looks good, it shows how responsible you are (as a small business owner) in handling your finances.
There will be certain unexpected instances where you may need funding but don’t have the cash immediately. Business credit becomes an accessible option for small business owners to get a hold of cash during emergencies or unexpected circumstances.
Additionally, having a good small business credit score also allows you to get business insurance at a lower rate. This can be very helpful, especially when your business begins to expand and costs will be much more expensive.
How are Business Credit Scores Calculated?
The way business credit scores are calculated based on a few factors:
- Outstanding balances
- Credit utilization
- Payment patterns
- Timely trends
- Trade experience history
- Your company’s size and age
Ultimately depending on the funder, the higher the score is, the lower the risk, or vice versa. You need to check on the different funders’ score ratings to get a much clearer image of how they calculate it.
Always Pay Bills on Time
This advice may sound like a no-brainer, but many small business owners still need to remember this one. Paying your bills on time and not missing out on deadlines is the most simple and easiest way to improve one’s small business credit score.
If you don’t pay on time, your credit score will suffer significantly, and you’ll be at a higher risk of debt.
Keep Your Business and Personal Finances Separate
Small business owners may tend to use the same bank account for their personal and business transactions. This can be dangerous and unorganized as you may accidentally spend your business funds on a personal purchase.
Because of this, it can negatively affect your small business credit score. Funders may also want to look at your personal credit score, which can result in getting smaller amounts of financing or even getting rejected.
Have a separate account for your business funds so that everything’s streamlined and you can focus on your small business’s actual amount without getting distracted by the other numbers.
Regularly Check Your Business Credit Report
It’s essential to look at your business credit report from time to time. You can obtain a copy from major credit reporting companies for a price. Once you’ve read the information in the report, you have an idea of what you’re working on and take the necessary steps to raise your credit score.
Set Up Credit Accounts with Suppliers
If your small business requires you to partner with specific suppliers continuously and you’re able to develop a good relationship with them. In that case, it’s time for you to establish a credit account with them. By doing this, you can add the number of positive payments to your report. This is yet another good way of improving your small business credit score.
Lessen Your Credit Utilization Ratio
Major credit reporting companies determine business credit scores through the ratio of credit being utilized to how much credit is available. It’s best to keep the ratio below 15%, and you can do that by paying off your balances and paying your bills more than once a month.
Avoid Having High Debt Levels
If your small business owes banks and other funders a lot, it can negatively affect your credit score. Lower debt levels mean there’s lower credit utilization, which is a nice thing because it’s an important factor in keeping your credit score at a good level.
Conclusion
At REIL Capital, we support every small business owner in achieving their financial goals. This is why we provide many funding services for business owners like you who have difficulty getting approved for funding from traditional banks and lenders.
We know how overwhelming it can be, and you’re bound to have questions. We are very happy to answer them if you send us a message. And once you’ve got your questions answered, you’ll be more confident to apply for funding with us!
