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What is a Business Credit Rating?

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With the constant replaying of “free credit report” commercials, it’s likely that very few American consumers are unaware of the importance of their personal credit reports. Personal credit reports are compiled by credit bureaus based upon reports from creditors, and those credit reports can positively or negatively impact the ability of an individual to secure financing. However, as a business owner you may not be aware of the fact that you don’t have to rely solely on your personal credit when you seek financing for your business. Additionally, the establishment of a good business credit rating should allow you to avoid the necessity of personally guaranteeing business loans.

If another business has issued credit to your business in the past -- or if you’re currently in the process of securing credit from another business -- you’re probably already on the way to the initial establishment of your business credit rating. Such business-to-business credit is known as trade credit and comprises a large percentage of global financing. In some cases where trade credit is given to a business, the business providing the credit reports the transaction to a business credit bureau. Using that information, the bureaus, such as Dun & Bradstreet or Experian Business, begin your business credit report by creating a file that lists the name of your business, your location and your employer identification number. Subsequent credit advances – and your repayment history, timeliness and any suits or liens – are listed in the report, and future creditors will reference your business credit report before deciding how much -- if any -- money they’re willing to loan you.

Next Page: How does my personal credit rating differ from a Business Credit Rating?

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