Business Credit 101

A surprising number of business owners are not aware of their business credit scores, and almost as many are not even aware that they have a business credit score. However, that business credit score can come into play in a major way if you should need a loan at some point, because it often provides the basis for potential lenders to evaluate the overall health of your company. Here’s what you need to know about your business credit.

Personal Credit vs Business Credit

A great many business owners operate their companies using their personal credit, which can leave you vulnerable to any adverse actions sustained by your company. In the past, lenders often assessed personal credit when considering a loan application, but today this has shifted more to an evaluation of business credit.

Duration of Business Credit History Lines

Lines on your business credit history stay there for a specific period of time, just as they do with your personal credit history. For instance, trade data and typical business transactions will stay on your history for up to three years, while bankruptcies stay on your credit history for nine years. Any judgments or tax liens levied against your business will stay on your record for six years and nine months.

How to Calculate Business Credit

The main factors involved in determining business credit are as follows: business credit history, volume of transactions, credit utilization, and the presence of outstanding debts. In addition to these financial considerations, certain static data is also evaluated, such as the size of your business, the type of industry you’re in, and the number of years you’ve been in business.

Why Strong Business Credit History is Advantageous

It is definitely to your advantage to have strong business credit history, because you will have a much easier time securing credit and financing for any business needs you may have. Your credit history will also follow the business itself, so that if you decide to sell at some point in time, your good business credit is transferable to the new owner. This in itself may be a strong selling point which increases the purchase price of your business.

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