According to a survey by Creditera, nearly half of small business owners don’t know they have a business credit score—even though that score is critical to obtaining business loans and other forms of financing.
More scary statistics from Creditera’s research:
- 20 percent of small businesses have considered closing their doors in the last 12 months, and financial issues are prominently cited as a reason why.
- 26 percent of entrepreneurs didn’t expand their businesses or hire more employees because trying to find the funding to do so is too frustrating.
Lack of awareness about your credit score has big repercussions for your business’s goals and vision. About 40 percent of the small and midsized businesses Creditera polled didn’t know their business credit scores and those entrepreneurs envisioned business growth of less than 5 percent. However, nearly 75 percent of the small and midsized business owners who do understand their business credit scores have loftier goals, envisioning business growth of 5 to 20 percent.
They say knowledge is power—and clearly, knowledge of your business credit score, how to improve it, and how to protect it can give you the power to grow your business. So where should you start?
- First, check your business credit score by contacting business credit reporting agencies D&B, Experian and Equifax. If you see any errors, correct them. Continue to check your report regularly (at least once a year) for accuracy.
- Don’t mix business and personal credit. Many small business owners charge business expenses on personal credit cards, and vice versa. This is a big mistake. Always use business accounts to cover business expenses—otherwise, your business won’t build its own credit report.
- Pay your bills and vendors promptly. Just as with personal credit, making timely payments is of the essence in maintaining a good business credit score. Also ask your suppliers to make sure that they report your payment history to the relevant business credit scoring agencies, since not all companies will do this unless you ask.
- Use credit wisely. You need some business credit to build a credit score. It’s best to have a few different business credit cards so that if one company suddenly changes terms or lowers your limit, you won’t get caught short. Also consider obtaining a business line of credit, using it and paying it back. It’s best not to use all your available credit—try to keep usage to 30 percent of your total credit available. This reassures lenders that you have plenty of wiggle room.
Need help getting your business credit score in shape? Your SCORE mentor can help you develop a plan for improving it. Visit www.score.org.