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Small business owners have a ton of responsibilities. While managing day-to-day operations can be challenging, it’s also important to have a plan for long-term growth. Being able to access capital when you need it can be critical for the success of your business. And one of the things you’ll need is a strong credit profile. Here is how your business credit score is calculated and some steps you can take to improve it. 

What is a Small Business Credit Score?

Similar to a personal credit score, your business credit score measures the credit worthiness of your small business. Business credit scores generally range from zero to 100 and are tied to your company’s EIN. Some of the factors used to calculate a business credit score include your business’s payment history, amount of debt, credit mix, and amount of new credit. 

How to Improve Your Small Business Credit Score

A strong business credit score shows lenders that your company is financially stable and able to repay a loan. Here are some of the steps you can take to improve your small business credit score:

1. Register Your Business and Apply for an EIN.

The first step to establishing business credit should be to register your business with the appropriate state entity, which is usually the Secretary of State. Then, you can apply to the IRS for an official EIN, which is a business federal tax ID number. 

2. Open a Commercial Bank Account. 

Now that your business is “official,” you can approach the bank of your choice to open a business bank account. This will allow you to begin paying your bills under your business’s name, which can help build credit. 

3. Establish Trade Lines With Your Suppliers.

If you buy materials from third-party vendors, setting up trade lines with them can help you build your business credit. Once you get three tradelines established, you can get a Dun and Bradstreet Paydex score, which reflects your payment history. 

4. Pay Your Bills On Time or Early.

Always pay your bills on time, if not early. Set up automated payments on your credit accounts if necessary so that you are never late. 

5. Work With Lenders That Report Your Activity. 

Once you have a credit profile established, borrow from lenders that will report your activity to the major credit bureaus. Small business loans can boost your credit score if you make your payments on time. 

6. Monitor Your Business Credit Report. 

Periodically pull your own business credit report from Dun & Bradstreet, Equifax, and Experian. Make sure all of the information is consistent across the three agencies. If there are any inaccuracies, dispute them promptly so that the items can be removed. 

7. Lower Your Credit Utilization Ratio. 

Just because someone gives you credit, that doesn’t necessarily mean you should use it. If you are using a majority of your available credit, it will have a negative impact on your score. You can improve your business credit score by paying off your balances, reducing your spending, and opening a new line of credit that you don’t use. 

8. Get Collections Deleted When Paid. 

If your business is sent to collections for any reason, make sure you request that the notation is removed from your business credit profile when you settle the debt. You can do a “pay for delete” with the collections company. 

Get Custom-Matched Financing Solutions for Your Small Business

Whether you’re a startup or an established business, it’s always to your benefit to keep an eye on your business credit score so that you have ready access to capital. At CAB Capital, we help small business clients achieve their goals with a wide variety of financing options. With over 150 products from a group of 67 different lenders, we make sure you get the funds you need at the best possible terms. Contact us today to discuss your goals and learn more about your options.