Whether you\u2019re in the early stages of building a business or you could just use more funding, building your business credit score can unlock your company\u2019s potential.<\/p>\n\n\n\n
Here\u2019s everything you need to know to make it happen.<\/p>\n\n\n\n
See how Quicken helps you build your business and your credit. Business credit represents your company\u2019s ability to borrow money or acquire financing. It\u2019s similar to personal credit but specifically linked to your business instead of your personal finances. <\/p>\n\n\n\n Your company\u2019s credit score is used by lenders, suppliers, or other potential partners to assess the potential risk of working with you.<\/p>\n\n\n\n If a bank loans your business money, how likely are you to pay that loan back in full? A higher business credit score means your business is more likely to manage any new credit responsibly.<\/p>\n\n\n\n A good business credit score shows the world (or at least lenders) that your business is doing well and can be trusted. This helps you access the funds you need when you need them, for things like buying new inventory or equipment. <\/p>\n\n\n\n Sometimes, in the act of doing business, we have to pay for things to do the job before we receive any money from a client. So there\u2019s a gap between the time the cash goes out and the time the cash comes in \u2014 credit can help you bridge that gap, giving you a way to pay for things until that money comes in.<\/p>\n\n\n\n Also, like getting a discount at a store you often buy from, you can get better interest rates & terms on loans and credit cards. <\/p>\n\n\n\n A good business score depends on where you look. Several major credit bureaus report credit scores for businesses, and each one uses a different scale.<\/p>\n\n\n\n Let\u2019s walk through them.<\/p>\n\n\n\n There are four main places you could get your business credit score: <\/p>\n\n\n\n Different agencies use different methods, but the core elements they focus on don\u2019t change a whole lot from one to the other.<\/p>\n\n\n\n Here\u2019s a breakdown of the main factors that affect business credit scores.<\/p>\n\n\n\n The most significant factor for business credit is how good your business is at paying its bills on time and in full \u2014 whether that\u2019s loans, credit cards, or trade accounts. If you\u2019ve been paying all your bills on time, it\u2019s much more likely that you\u2019ll pay any new bills or loan payments on time too.<\/p>\n\n\n\n This refers to how much of your available credit you\u2019re using. If you\u2019re close to maxing out your business credit cards, that might mean your company is in financial trouble. If you\u2019re well under your limit, that\u2019s more likely to be a sign of financial health.<\/p>\n\n\n\n Keeping your credit utilization low \u2014 ideally below 30% \u2014 is considered good practice.<\/p>\n\n\n\n The amount of outstanding debt your business has matters, especially in relation to how much revenue you\u2019re bringing in. A company that brings in $1M per year can generally carry a lot more debt than one that\u2019s bringing in $60,000.<\/p>\n\n\n\n If you have a lot of outstanding debt compared to your revenue, your business could struggle to pay back any additional debt.<\/p>\n\n\n\n The longer your business has been around and responsibly using credit, the better. Lenders like to see a track record that proves you\u2019ve managed your finances well for a long time.<\/p>\n\n\n\n A newer business will have less credit history, but they can build business credit with tools like secured lines of credit or equipment loans that are often easier to get than other forms of financing.<\/p>\n\n\n\n Business credit bureaus also consider any negative public records about your business, such as bankruptcies, tax liens, or judgments. These items tend to hurt your score a good bit if you have any.<\/p>\n\n\n\n The type of business you\u2019re in can also influence your score. Some industries are considered riskier than others, so if you\u2019re in a tough industry, that could bring your score down a bit.<\/p>\n\n\n\n Still, it\u2019s not as big a factor as the ones listed above.<\/p>\n\n\n\n Larger companies or those with higher revenues may be viewed as less risky. This isn\u2019t necessarily a direct part of the score calculation, but it\u2019s often used by lenders when deciding whether to extend credit to a company that\u2019s requesting it \u2014 like for a loan or new credit card.<\/p>\n\n\n\n Like with personal credit, there are a few things you can do consistently to ensure you get recognition for your good business practices, such as paying on time and strengthening your credit history.<\/p>\n\n\n\n Let\u2019s walk through them.<\/p>\n\n\n\n First, ensure your business is legit! Register your business and obtain the necessary state and local licenses to operate. You want to make sure everything about your business is legal and that you\u2019re operating with the proper approvals from state and federal officials.<\/p>\n\n\n\n This is also a great time to put together a business plan. Potential lenders will want to look at your goals, your business\u2019s practices, how you plan to grow, and how you\u2019ll use their financial support practically and responsibly. A strong plan shows that you mean business \u2014 literally!<\/p>\n\n\n\n After registration, you can go online and apply for an Employer Identification Number (EIN). This is essentially just a social security number but for your business. It works as a tax reporting number so it\u2019s important for your business credit.<\/p>\n\n\n\n
\n Continue \u2192<\/a><\/p>\n<\/div>\n\n\n\nWhat is business credit?<\/h2>\n\n\n\n
Why does a good business credit score matter?<\/h3>\n\n\n\n
What\u2019s a good business credit score \u2014 and where can you see yours?<\/h3>\n\n\n\n
Who reports business credit scores?<\/h3>\n\n\n\n
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How business credit scores are calculated<\/h2>\n\n\n\n
Payment history<\/h3>\n\n\n\n
Credit utilization<\/h3>\n\n\n\n
Debt-to-income ratio and outstanding balances<\/h3>\n\n\n\n
Length of credit history<\/h3>\n\n\n\n
Public Records<\/h3>\n\n\n\n
Industry risk<\/h3>\n\n\n\n
Company size and revenue<\/h3>\n\n\n\n
Steps to build business credit<\/h2>\n\n\n\n
Step 1. Establish your business entity<\/h3>\n\n\n\n
Step 2. Obtain an EIN (Employer Identification Number)<\/h3>\n\n\n\n