What is a Small Business Credit Score?

small business bakery

When you think about a credit score, a small business credit score probably does not come to mind. But, if you are a small business owner, it’s a vital piece of what will make your business succeed. A small business credit score is similar to a personal credit score. It allows lenders to determine the creditworthiness of small businesses. But it has additional value so if you’re a small business owner, read on to familiarize yourself on what makes up your business credit score.

What is a Business Credit Report?

Similar to a personal credit report that shows what an individual’s financial behavior, a business credit report shows a company’s financial behavior. It is a collection of all of your business’s credit history – specifically your use of company credit cards and loans taken under your business. Credit scoring agencies can then use this information found in your business credit report to determine a score using various calculations. The score then is used by banks, lenders, and more to evaluate your creditworthiness.

According to the Small Business Association (SBA), the following is typically found on a business credit report:

  • Company information (number of employees, sales info, ownership, and subsidiaries)
  • Historical data of the business
  • Business registration data
  • Government activity
  • Business operational data
  • Industry classification and data
  • Public filings, such as liens, judgments and UCC filings
  • Past payment history and collections
  • Number of accounts reporting and details

How is your Business Credit Score Calculated?

A business score has its own calculation. It considers many of the same factors as a personal credit score, including payment history and the amount of debt. 

While there are various small business credit scoring agencies, here are a few main types of business credit scores:

Dun & Bradstreet PAYDEX Scorescores range from 1 to 100, and the closer to 100, the better. 

Experian Intelliscore Plusscores range from 1 to 100, and the closer to 100, the better. 

FICO SBSS – scores range from 1-300, and if your score is higher than 140 it is great credit that should qualify you for a SBA loan. 

What is Considered a Good Score?

Business credit scores tend to vary based on the reporting company or bureau. For example, a Dun & Bradstreet PAYDEX Score of 80 or higher would mean you have excellent credit – you make your payments regularly and on time. If you have a score of 50-79, you have fair credit, and under 50 is considered as poor.

To find out the exact scores needed for good business credit, it’s important to research the credit reporting agencies and check your reports on a regular basis. Additionally,  become knowledgable with credit scoring for your industry. The impact of different types of activities like late payments, available credit, credit utilization, and others can be different from company to company. 

How Do You Check Your Small Business Credit Score?

Unlike personal credit scores where it is straightforward to get your score, there are only a small number of ways to get your business credit score. A few ways to get your free credit score, but most likely it will be worth it to pay a service to get your score. 

Experian Business Credit Report allows you to:

  •  view your Experian business credit score
  • receive alerts when your Experian credit file changes
  • learn what affects your score

Equifax Business Credit Report provides:

  • Access your Equifax risk scores — Equifax Business Credit Risk Score and Equifax Business Failure Score
  • A summary of your business’s credit accounts with banks, suppliers and service providers
  • Identify the potential risk of late payments and business failure with Equifax risk scores

Why is a Good Score Important?

As a small business, your relationships are vital to success. A good score is crucial to building valuable relationships with:

  •  vendors
  • suppliers
  • manufacturers
  •  financial institutions
  • insurance agencies
  • ultimately your customers!

When you have a great score, it will mean financial benefits including:

  • lower interest rates
  •  better trade credit (a  loan extended by one trader to another when the goods and services are bought on credit)
  • access to financial support, loans, and credit 
  • better insurance rates

Final Word

Establishing and maintaining your business credit score is highly beneficial. The success of our business really depends on how good of a score you have. Now you understand a bit more as to what a small business credit score is and how to build a great score.