Understanding Business Credit Score

Regardless of the size of your business - large and small, it's important to establish and maintain a good credit score in the eyes of prospective lenders. An excellent business credit score will ensure your prospect of obtaining financial assistance at a time when you need it most.

However establishing a credit history requires a careful planning. Not to mention time and effort to build a solid business score.

If you've not done so and not quite sure where to begin, let's discuss some of the necessary steps to build your own business score.

The very first thing you need to do is to setup your business entity. It can either be a corporation or an Limited Liability Company (LLC). Without the legality of your business, you may not qualify for a business loan.

In order to prove your business existence, you need to have a physical address, a business telephone number, and a complete contact information.

Make sure you've secured all the necessary business permits and licenses required for your business in your local state.

Register for a business tax ID number. If your business has been in operation for at least 2 years, you should have a complete record of financial statements and its own tax ID number.

It's also important that you open a business savings account and make sure that you have a balance of at least $10,000 for the past 3 months. In this way, you're able to prove that your business is financially stable and looks more favorable to the lenders.

While often neglected by many business owners, it's equally crucial that you build up a good business-to-business relationship with your suppliers or business partners. Having a list of solid business references is crucial for establishing your business score.

Last but not least, you need to register your business with a business credit bureau like Dun & Bradstreet. D & B is a leading business credit reporting agency in the US with its own Paydex score.

If you aren't in the know, Paydex is the business equivalent of your personal credit score. Just like individual credit score, it is similar in a way that both are used to determine whether you’ll get a credit and on what terms.

Since your business credit score is directly related to how you pay your bills, it's therefore important that you keep your score high at all time by being on time with your payment. That's the only golden rule you need to remember.