What constitutes your business credit score? What gives you the best chance of getting a loan? Here are some factors that influence your business credit image and what you can do to get the most out of them:
1. Payment History – Your payment history is an important part of your business credit profile and is what your D&B Paydex score is based on. Many credit opportunities come with a minimum Paydex requirement. What you can do: Always pay providers BEFORE. On time is “fine”, but it is best to pay in advance (as before receiving the invoice).
2. Credit Applications – Believe it or not, multiple credit applications can be a red flag that will prevent you from getting approved for a loan. Too many in a short period of time will make your business seem hopeless and be a sign to potential lenders that things are going downhill. What you can do: Plan your use of credit accordingly and reduce requests to the minimum necessary to achieve your goals.
3. General UCC Presentations – One thing that many people don’t realize is that they need to pay attention to the order in which they obtain certain types of loans and the UCC presentations that lenders will present. Some lenders may file a “blanket” UCC filing, which basically says they have an interest in ALL of your assets. These general UCC filings will take precedence over subsequent ones, dramatically reducing your ability to obtain credit elsewhere. What you can do: Plan your credit carefully and negotiate UCC filings according to your needs. For example, if you need particular assets excluded from a UCC presentation to use as collateral for another loan, explain that fact ahead of time to exclude those items from any general presentation or, alternatively, get the loan or account with the more specific UCC. presentation first. Some experts recommend opening accounts with competing UCC filings at the same time and negotiating the details with each party simultaneously.
4. Company financial information: With D&B, it is important to ensure that the financial information in your credit file is up to date. If not, it could negatively reflect on your business when the lender is comparing available data. What you can do: Update your finances on your credit reports to reflect your current circumstances and plan to do so periodically.
5. Legal structure of the company: The legal structure of your company (LLC versus INC versus partnership, etc.) can also affect your business credit. Lenders are less likely to loan money to sole proprietorships and partnerships than corporations or limited liability companies. What You Can Do: If you’re not onboarding, you should be. The benefits go far beyond your ability to obtain credit.
There are other factors that affect your ability to obtain credit, such as the amount of debt you already have, the degree of investment you have in your business, and even your personal credit can influence your approval or rejection. Here we have covered five of them. In the end, the better the big picture you can paint, the better your chances of getting approved for loans.