Whether you’ve recently started a business or you’ve been in business for years, there are tons of questions that come up, especially when you’re thinking about growth and whether or not you need a business loan. Some of these may apply:

 

Have you taken out any business capital loans? Are you financing equipment? Are you leasing a business space? Are you paying vendors for supplies and services that enable you to run your business? Do you have a business credit card?

 

If you answered yes to any of these questions, then you likely have a business credit score, just like you have a personal credit score. This is important to­ understand because a good business credit score will help you (or hurt you) the next time you apply for a small-business loan or try to get another business credit card. When it comes to managing all of your business’s financial dealings, you need to borrow responsibly. At Main Street Business Capital, we believe that understanding these parts of a business credit score can help you in the long run. Take a look!

 

How Are Business Credit Scores Calculated?

Just like your personal credit score, there are numerous factors that go into calculating your business credit score. However, rather than measuring your credit history, a business credit score is meant to measure your company’s creditworthiness.

 

Business credit ratings typically range from scores of 0 to 100, and there are three primary credit bureaus who calculate the scores: Equifax, Experian and Dun & Bradstreet. Each bureau has a different way of collecting data, measuring data and calculating scores. Because of the different methods each credit bureau uses to calculate scores and the different sources they may use to gather data, mistakes can happen. You need to check your business credit reports with all bureaus. Make sure your information is up-to-date and accurate with each one to prevent inconsistencies.

 

How Are Business Credit Scores Different Than Your Personal Rating?

If you are the principal in a small business (LLC or DBA, for example), some lenders and credit card companies will factor in both your business credit scores and personal credit scores before approving a line of credit. Last but not least, your personal scores are accessible by only you and select approved parties, whereas your business credit reports are completely public. Vendors, creditors, customers and business capital partners can and will access your reports before choosing to do business with you.

 

Let’s take a look at each of the three main credit bureaus and their basic methods of calculating business credit scores:

 

Dun & Bradstreet

Dun & Bradstreet measures risk based on a PAYDEX Score that ranges from 0 to 100. Ultimately, their scores are meant to provide a recommendation to lenders on how much credit they should extend to your business. It is free to file for your DUNS number on Dun & Bradstreet’s website. Dun & Bradstreet also calculate credit scores and financial stress scores based on ratings of 1 to 5. These also factor into your overall business credit rating.

 

Equifax

Equifax provides three assessments that factor into your business credit score. These measurements include the credit risk score, the payment index and the business failure score. The credit risk score ranges from 101 to 992 and determines the likelihood of your business being delinquent on payments. The payment index is measured on a scale of 0 to 100 and shows if you are getting all your vendor and creditor payments in on time. Lastly, the business failure score simply shows how likely your business is to close, based on a rating of 1,000 to 1,880.

 

Experian

Experian produces what they call a CreditScore report. The final score ranges from 1 to 100. It factors in a business credit score, payment trends, public records, account histories and other information they gather.

 

It is very important to know all of the factors that go into each of your business credit scores with each of the primary business credit bureaus. If you maintain good ratings, it will make a big difference in the long run as you apply for more credit and try to get working capital loans. If not, you may be denied for credit or be stuck with much higher interest rates. For more information on how to protect your business credit score, contact Main Street Business Capital today.