Checking your business credit score is a critical factor for owners seeking to borrow money for small businesses. Here’s why.
When applying for loans, lenders take several factors into account and, for small business owners, this may include their business credit scores.
But recent research by OnDeck Australia found that 53 percent of small business owners aren’t aware that a credit scoring system applies to Australian businesses, which impacts their access to capital and trade terms with suppliers.
Healthy business credit scores improve the likelihood of a business owner receiving lower interest rates on commercial loans, while exceedingly negative scores may make it difficult to receive a loan at all.
OnDeck Australia’s survey, undertaken by independent research firm Honeycomb Strategy this year, found that 47 percent of business owners are aware of credit scores (a big jump from seven percent in 2018), but only a third of these know what their score actually is.
MYOB Loans’ recently relaunched its Know Your Score portal, which allows small business owners to quickly and easily check their business credit score, which is the first step to maintaining good credit health.
This score is derived from your business credit file, which is maintained by reporting bureaus such as Equifax.
“Your business credit score is a numeric indicator derived by credit reporting bureaus from your credit file,” said Cameron Poolman, chief executive of OnDeck Australia.
“This number is one of the factors lenders and some suppliers use to assess the risk of lending to your business.”
The credit file maintained by the reporting bureaus will contain the following types of information:
If you have a good track record of borrowing and making repayments on time, then you should expect your credit file to result in a good business credit score. But mistakes can happen.
“The reporting bureaus want the data they have on your business to be as accurate as possible, but sometimes that might not be the case.
“As a result, bureaus offer ‘dispute processes’ that allow business owners to make corrections to any verifiable incorrect information on their credit profile,” Poolman explained.
If your credit score isn’t looking as good as you’d expect, then it may warrant you purchasing your entire credit file from the bureau. If there are entries on the file that you can confirm are incorrect, then it’s time to raise a dispute.
Here’s some general guidance for small business owners to follow if they want to maintain a top-notch credit score, whether personal or business:
Don’t wait! Get your FREE business credit score today via the Know Your Score online portal.