What to Expect When Pulling Credit on a Small Business

business creditWhen consumers apply for credit cards, mortgages or car loans, lenders pull credit reports to review their credit history and ensure they are a good financial risk. The same is true for companies that apply for credit lines for business purposes, such as building a new facility, buying office equipment or upgrading technology. The entity extending credit – be it a vendor, lender, or other creditor – pulls a business credit report to assess the creditworthiness of a company. A business credit report evaluates information on a company’s business structure, industry, financial performance, and payment history and typically contains:

  • Business history
  • Basic company information
  • Payment history
  • Business registration data
  • Government activity
  • Company operational information
  • Industry information
  • Public filings (liens, judgments, and UCC filings)

With all of this data, a business credit score is calculated which, in effect, sums up a company’s creditworthiness.

Business reports are created by Experian, Equifax and Dun & Bradstreet. Even though the reports  contain similar data, each provider calculates its respective business credit score differently. It is critically important to review business credit reports regularly to ensure they free or errors.

Why a business credit report is important

One of the factors that determines the success or failure of a business is the credit terms it receives. Lenders, vendors, potential business partners and others who may play a role in a company’s success use its business credit report and score to determine the company’s creditworthiness and whether to proceed with a business relationship. A small business credit score is also critical for keeping personal and business financial risk separate.

The entities for which a business credit report is important include:

  • Companies that are negotiating payment terms with vendors, suppliers, or customers
  • Companies that are getting pre-approved for a loan
  • Creditors that are assessing the application of a potential business borrower

A smart small business owner knows that credit affects his or her ability to obtain capital to expand. And, smart creditors know that a business credit report can influence whether to extend credit and if so, the amount and terms of a loan.

So, before extending credit to a company or offering terms for a business loan, be sure to make good use of the business credit data that is out there to ensure financial risk is minimized.


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