The fundamentals of business credit

As a business owner, your personal credit history comes into play, but your business has its own credit information. In fact, it has a credit report and score.

Although this financial information isn't for personal needs, it does serve some of the same purposes. Once your business has its first credit transaction, its credit history begins and is attached to your employer identification number - as your Social Security number is attached to your credit details.

One key difference between business and personal credit is the manner in which the former is used. Here are some ways your company's credit can impact growth:

  • Financing: Business credit scores are used in financing decisions. If you were to apply for a loan under our business banking solutions, for instance, your company's financial rating would be among the information evaluated in the credit decision.
  • Government contracts: The government often hires businesses for various projects. When a company submits a bid for a contract, its credit score is examined. Landing a government contract is a big step for any company, as it usually leads to repeat business and a steady revenue stream for some time.
  • Supplier discounts: If vendors are extending credit to your business, they will examine your company's credit history. A positive report can yield discounts and affordable terms.

Check your business credit report
Remember to review your company's financial history every once in a while. Doing so is a key step in preventing business identity theft.

Additionally, you need to know what information actually appears on your business credit report. Payment history and other details are voluntarily reported by creditors. This can present certain challenges for new inquiries. If only one of your accounts is reported and you have a few late payments, new creditors can't see that you have on-time payments for your other five accounts. As a result, it could appear that your business isn't creditworthy.

Keep in mind business credit reports aren't free. While you get one free copy of your personal report from each of the three major credit reporting agencies each year, your business has to pay every time. You can order your company's credit information from Experian Business, Dun & Bradstreet, Equifax Business, Business Credit USA and other reporting agencies.

For more information about how you can grow your business, contact Landmark Bank.

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