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04 января, 16:16

Why Your Business Credit Score Can Make (or Break) Your Business

By Zohar Steinberg Many new business owners overlook their business credit scores, one of your most essential resources. If you don't make an effort to establish a solid business credit score, growing your business will become more difficult. It can also cause you serious problems when you need a line of credit or experience cash flow problems for any reason. Keep in mind that your business credit score is distinct from your personal credit score, though the two certainly impact one another. Make sure you're familiar with your business credit report and do everything within your power to improve your score. Many first time entrepreneurs use their personal credit card for business expenses, unaware that by using their business credit card they can build their business credit and get many more available credit options. As an entrepreneur, I have had the pleasure of working across multiple industries, learning with every new business, discovering new areas and uncovering key information. Above all, I enjoy discovering things I once was unfamiliar with, and how digging into these blind spots can help my business grow. Building Up Your Credit All businesses require a certain amount of cash flow to function and grow. In some cases, loans and lines of credit are essential for expanding and even paying for basic supplies or making payroll. Most businesses go through cycles, which may be related to the economy or due to seasonal or industry-related factors. For example, shops, restaurants and hotels in certain tourist towns often do well in the summer, but slow down in the winter months. The ability to obtain credit can be a lifesaver for a business during leaner times. The most obvious reason for having good credit is that it enables you to borrow money. Loans can help you start a business, survive during challenging times and expand. Using Your Business Credit Report to Build Trust Every business thrives on trust. You need the trust of your customers, lenders, suppliers, landlords and anyone you deal with to run your business. The easiest way for someone to gauge your trustworthiness is to look up your business credit score. Business credit has an impact on everything you do: If you want to sign a lease to rent an office, the landlord will check your business credit score, as will suppliers you want to deal with. If you score is low, some companies will not want to do business with you at all. Those who do are likely to demand payment up front. When you have a good business credit score, on the other hand, suppliers will be more willing to extend you a line of credit. Even potential customers may check your business credit score before deciding whether or not to buy your products or services. In the digital age, when it's easy to obtain such information, people are becoming savvier about doing their research. What Determines Your Business Credit Score? Business credit scores are calculated on a scale of 1 to 100, with 100 being a perfect score. Three companies compile these scores: Scorely, Dun & Bradstreet and Experian. While they all use slightly different methods for calculating credit scores, they all use similar criteria, including: Basic information about your business. This includes how many years in business, size and classifications such as Standard Industrial Classification (SIC), which identifies a business by industry. Credit history with suppliers and lenders. Information from public records, credit card agencies, collection agencies and other sources. This includes factors such as bankruptcies, outstanding debts, liens, judgments and UCC (Uniform Commercial Code) filings. Monitoring Your Business Credit Keep in mind that your business credit score is not static. Every action you take related to your business and finances potentially impacts your score. You can improve it by paying bills on time and taking care of old liens, taxes and debts. I ask vendors and suppliers to report my payment history to the business credit bureau. Many business owners don't know that the vast majority of suppliers and vendors do not report customer payment history to the bureau, which can hurt you. Lastly, actively monitor your score. Regardless of how long you've been in business, or even if you're in the planning stages of opening a new company, you can't afford to overlook its importance. Zohar Steinberg is serial entrepreneur, founder & CEO of token, a security driven, payment company on a mission to make payment fraud a thing of the past. -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.