Some of the latest figures show that an estimated 4 in 10 people do not know their credit score. Additionally, many business owners are confused as to how to obtain and build business credit, and how their personal credit score affects their ability to access loans for their company. Whether you are your only employee, or you’ve hired a sizeable staff, making it a point to monitor your credit scores can help your company succeed in the long-term. In addition to closely tracking your business accounts, be sure to keep close tabs on both your business and personal credit scores for the following reasons.
Good credit scores can help you obtain bank loans
Improving your chances of obtaining finance by boosting your personal and business credit score can be crucial to the long-term success of your company. If you hope to one day get a business loan from the bank, you and your organization must meet strict financial standards. Although you’ve likely had experience in getting a car, personal, or home loan, these financial products are far easier to obtain than a bank loan for a business. Your revenue, the amount of time you’ve been in business, and other factors must be met (and often, exceeded) to receive any kind of funding. In fact, one of the top criteria is that you must have both solid personal and business credit scores. If either one is lacking, you can automatically be denied for the loan.
You get better interest rates on loans and credit cards
As with all types of loans and credit cards, your credit score can help you get better interest rates on financial products for your business. This is especially important if you are looking to apply for a loan through a less traditional source. These companies often have much higher interest rates to start than a standard business bank loan. The current range for traditional business loans is between 7.75% – 10.25%, whereas non-traditional loans to fund various business expenses can go as high as 30%.
Allows you to purchase business insurance at the best rate
Business insurance helps companies “protect their financial assets, intellectual and physical property from a covered loss due to risks such as lawsuits, property damage, theft, vandalism, loss of income and employee injuries and illnesses.” In order to obtain business insurance, some providers require that you have a business credit score. Although this is not required by many, having a good credit score will help you access lower premium rates.
While tracking your company financials, don’t forget to keep a close watch on your personal and business credit. Not sure how to build your business credit? Experts recommend opening a business card, paying off any existing balances, and working to correct any errors that appear on your credit report.