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What Are the Benefits of Building a Good Business Credit Score?

business credit score

There are about 28 million small businesses currently operating in the United States alone. But the most successful companies all have one thing in common: a great business credit score.

Building your business’s credit score takes time, but the higher the number is, the better off you’ll be. So, why is having a great score so important?

Here are just a few of the ways having a stellar credit score can help your brand and your business.

Makes It Easier to Get Loans

When you take out a personal loan, the bank takes your personal credit score into consideration. And until you build a business credit score, the bank will use your personal score to determine if you qualify for loans for your business.

If you’ve invested your personal funds or taken out personal loans to fund your business expenses, it will hurt your personal credit.

This can make it hard to qualify for loans in the future, especially while you’re focusing intently on growing your brand.

Building a business credit score makes it easier to get those business loans in the first place. Instead of taking your personal finances into consideration in addition to your company’s profits and performance, lenders will just look at your business’s finances.

This means you’ll be more likely to qualify for a business loan with a high business credit score even if your personal score is still on the low side.

Helps You Get a Better Interest Rate

High credit scores show that you’re responsible with your finances. Your business credit score is no different.

When you have a high business credit score, you’ll be more likely to get a lower interest rate on any business credit cards or loans you take out. The lower the interest rate is, the less money you’ll pay over time.

Consider this: the average interest rate for small business loans is between 6 and 8 percent. If you get an interest rate of 6 percent, you’ll pay thousands of dollars less than a borrower who has an interest rate of 8 percent or higher. That’s thousands of dollars in your pocket.

This gives you flexibility in how you use your money and makes it easier to start planning for and investing in your business’s future.

Saves You Money

Lower interest rates mean lower monthly payments on loans and credit cards. But that’s only the beginning.

When you have a good business credit score, vendors and suppliers may also offer you better terms. Remember, you don’t always have to pay cash for inventory. Some vendors allow you to buy on credit.

This makes it easier to maintain inventory levels even when your sales for the month are lower. But if you don’t have great credit, those vendors will offer you terms that may not be favorable to your company.

Remember, when you buy on credit, the vendor is taking a risk. They use the higher interest rate to hedge against that risk and make up for the fact that you’re not paying them up-front.

When they offer you favorable terms, you’ll save money and be able to spread out major purchases easily.

Protects Your Personal Finances

When you take out a personal loan, even if it’s for your business, your personal finances AND your business finances are at stake. If you default, the lender could go after both your personal and business assets if you’re not incredibly careful.

Building a business credit score allows you to completely separate your personal finances from your business finances. And any loans you take out get backed by the business alone. There’s no need to worry about lenders asking for a personal guarantee or leveraging your personal assets as collateral for the loan.

And those business loans won’t end up on your personal credit history. This will help you keep your personal credit score higher.

Makes Growth Easier

Business loans aren’t just for making ends meet or developing companies in their early stages—they’re also ideal for growing established brands.

Without a good business credit score, you won’t be able to focus on growth without relying on your personal funds. It’s up to you to find the cash to invest back into your business.

But with a good credit score, you’re better able to take out loans to help you grow and expand.

Gives You an Edge Over the Competition

As we said before, a high business credit score will help you save money either on interest payments for loans and business credit cards or through regular fees from your suppliers. It shows that you’re trustworthy and your creditors will reward you with better terms.

But think about how you can use those savings to make your business more attractive. You could offer discounts to your clients and clients. Or you could simply add to your regular profits month after month.

No matter what you choose, it will make your company stand out from the crowd. When you offer discounts to your clients or offer lower prices in the first place, you become more competitive in the market. And when you have higher profits each year, you have more money you can invest back into your business.

This helps you separate your company from others in your industry. The more you stand out, the more people will remember your brand and approach you when they need your services instead of going to someone else in town.

Building a Business Credit Score Is Simple

Building a business credit score isn’t terribly difficult. Just make sure you pay your bills on time, separate your personal and business finances, and keep checking your score every quarter.

Need extra help setting up a business checking account or applying for a business loan? Contact us today and let our team walk you through the process. The sooner you get started, the faster your business credit score will build.


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