What exactly influences your business credit score? And how can you improve your chances of securing a loan? Let’s break down the five key factors that impact your business credit so you can optimize them for your benefit:
• Payment History: This is a cornerstone of your business credit profile, especially your D&B PAYDEX score. What can you do? Pay your bills on time or even early to show lenders you’re reliable. This positive payment history reassures vendors and lenders about your creditworthiness. So, to improve your chances of getting credit, consistently pay your bills on time or ahead of schedule.
• Blanket UCC Filings: When you take out certain loans, lenders might file a UCC (Uniform Commercial Code) filing against your assets. A blanket UCC filing means a lender claims an interest in all your assets, which can limit your ability to secure more credit. What can you do? Plan your credit strategy carefully. If possible, negotiate with lenders to exclude specific assets from blanket UCC filings if you need them as collateral for future loans. Alternatively, consider securing loans or accounts that require specific UCC filings simultaneously to avoid one having precedence over the others.
• Company Financials: Keeping your financial information current on your D&B credit file is vital. This is because the outdated financials can negatively impact your business when lenders review your data. What can you do? Regularly update your financial statements to reflect your current situation accurately. This transparency ensures lenders have the most up-to-date picture of your business’s financial health, increasing your credibility.
• Company Legal Structure: The structure of your business (LLC, corporation, partnership, sole proprietorship) influences your ability to secure credit. Lenders prefer working with corporations and limited liability companies (LLCs) over sole proprietorships and partnerships. What can you do? If you are not already incorporated, you should be. This way, it will be easier to obtain credit and benefits, such as liability protection and potential tax advantages.
• Debt and Investment Levels: The amount of debt your business carries and how much you’re financially invested in your company also affect your creditworthiness. Lenders will look at your debt-to-income ratio and your equity in the business to assess risk. What can you do? Maintain a healthy balance between debt and investment to show lenders that you manage your finances responsibly. Optimize these five key factors to enhance your business credit score and improve your likelihood of approval.
About the Author
Robert Jackson is currently the CEO of Alln4fam Consulting Inc.
At Alln4fam Consulting, he specializes in helping business owners establish excellent business credit scores and then leverage those scores to access cash and credit for their businesses.
For more information on business credit scoring, business credit, visit: https://alln4businesscredit.com/
