The Benefits of Having a Good Business Credit Score

Every lender and loan type will pay attention to a different minimum credit score for loan eligibility. Needless to say, every lender will place a different emphasis on your credit score during the underwriting process. So there is no hard and fast rule. Generally speaking, certain types of loans need a much higher business credit score than others. And across the board, one cannot have only the minimum requirements of a small business loan and qualify for the financing he/she is aiming for. Your other credentials, such as annual revenue, time in business, investment in your business, etc. need to balance out that minimum credit score.

While you apply for business loan, you also need to be aware of the fact that if you have a lower credit score, you will be less desirable in terms of loans, like higher interest rates and shorter repayment periods. Having a bad business credit score in the form of default listings, missed or late payments, multiple credit enquiries or just a low credit score can make it really difficult for you to get a business loan approved.

That being said, however, it is worth noting that while traditional banks may be stringent about it, but alternative financial lenders tend to have more relaxed criteria. You can also apply for a different type of loan or put up business or personal assets as collateral.

It should also be kept in mind that depending on the lender you are applying with, it might be possible to get a bad credit unsecured personal loan for business purposes. However, in this regard one has to take note of the fact that since these loans are designed for personal use, they do not offer the flexibility and features that are designed for a business. Maintaining a good business credit score is the key to smooth business financing.

The following are the benefits of having a good credit score:

1. It will be easier to qualify for a loan- you can easily qualify for a loan if you have excellent business credit. Lenders are hesitant to lend money to businesses with poor credit history, as they suspect that such businesses won’t be able to make timely payments, if they can pay at all.  

2. You will receive better loan terms- once you qualify for a loan, lenders will consider more favourable loan terms for businesses that have proven their credit-worthiness.

3. It protects personal credit- your company debts will be reported on your company’s credit reports, which in turn saves your personal credit rating from the impact of any financial woe your business may face, and vice versa.

4. You will get more favourable terms from suppliers- once having established a strong business credit, it will help you in not only seeking loans from financial lenders, but will also prove to be advantageous for the credit terms provided by suppliers.

5. Get approved for higher limits- one of the benefits of having a good credit score is that banks are willing to let you borrow more money because you have demonstrated that you pay back what you borrow on time.

6. Better car insurance rates- the list of companies that can use a bad credit score against you also includes auto insurers. According to insurance companies, people with bad credit tend to file more claims and these people are penalized with a higher insurance premium.