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Business Credit Report
A business credit report can provide key information about a company's financial health, yet many companies aren’t fully aware of what it is, how it works, or how it can be leveraged to help win contracts, prove your company's creditworthiness, or help reduce costs associated with interest rates and insurance premiums.
Many businesses, especially those just starting out, have never even heard the term “business credit” before. In this article, we’ll answer some of your biggest questions, including:
What is a business credit report?
Why are business credit scores and ratings important?
How do you establish business credit?
How can low business credit scores be improved?
What is a Business Credit Report?
If business credit is defined as a company’s perceived ability to make good on financial obligations according to the terms of its contracts, a business credit report is the means by which that ability is expressed.
In other words, business credit reports can help illustrate clearly and quickly what a company’s payment behavior has been like and how that might impact their ability to fulfill contractual obligations now and in the future. Oftentimes, lenders, suppliers, and potential business partners will rely on these reports to help determine the level of risk associated with certain companies and use that information to help decide whether to do business with them or not.
What’s Inside a Business Credit Report?
D&B Credit Insights Basic
Scores & Ratings
Company Operations
Alerts & Notifications
Seamless Banking Integration
Why Are Business Credit Scores and Ratings Important?
Your Business Credit
Someday, if it hasn’t happened already, your business may need help financing the purchase of new machinery, acquiring inventory, or expanding your operations. When unexpected economic events arise, you may need to open a line of credit to remain operational. Even recurring costs like payroll can be covered by short-term loans.
In most cases, lenders require assurances that they’ll be repaid on time, and one way they can help manage repayment risk is by reviewing the business’s credit scores and ratings on file with the major reporting agencies like Dun & Bradstreet. These indicators can help banks determine whether or not to lend money and at what interest rates.
In addition, many businesses’ credit files are evaluated when they bid on contracts or shop their services to potential business partners. That’s because companies want to make sure they’re working with businesses that can deliver products on time or complete projects as promised – and have a low risk of going out of business.
Building strong business credit has many positive implications besides just helping protect yourself from personal liability. For example, business credit may be required or advantageous when:
Requesting higher trade credit limits from suppliers
Requesting lower premiums on insurance policies
Negotiating lease terms on equipment and real estate
Negotiating freight terms
Obtaining payroll credit
Winning contracts for national distribution from a large chain
Bidding on more lucrative contracts
Seeking line-of-credit increases
Seeking more favorable interest rates on loans from banks
- Applying for funds to cover an unexpected emergency
Others’ Business Credit
You may also be in a position where you’ll want or need access to other companies’ business credit scores and ratings. For example, if your company extends credit to its customers, you’ll want to have visibility into their payment history. If you’re in a growth phase, looking to join forces with another business, having access to their risk assessment scores and ratings can be essential in helping determine whether they’re a viable potential partner or not.
With a subscription to D&B Credit Intelligence, you can view other companies' comprehensive business credit reports to see those scores, ratings, and payment history, as well as ownership information and legal events including bankruptcies, judgments, liens, lawsuits, and UCC filings.
How Does A Company Establish Business Credit?
Ideally, business owners think about credit before they start a company. A business’s structure can affect how lenders or potential business partners judge its credit outlook. To structure your business in the most advantageous way, we recommend following these four steps.
Once you’ve followed these steps, credit, vendor, or supplier payments you make can count toward your Dun & Bradstreet credit scores and ratings.
Separation of owner and enterprise is often the best approach when looking to establish your business credit. As a corporation or limited liability corporations (LLC), your business will be classified as an independent entity, helping reduce a connection to your personal credit. If your business exists as a sole proprietorship, your business’s credibility may be linked to your personal credit.
As a result, lenders and potential business partners may rely on your personal credit score to judge the business.
This will be the number some lenders and potential business partners use to check your business’s credit profile, so you’ll want to have it available before applying for a loan.
An Employer Identification Number (EIN) is required to file your company’s taxes. Banks and potential business partners can also request it when you fill out paperwork. You can apply for a free EIN with the IRS.
Opening a separate business bank account can be another way to strengthen your business’s independent identity. A business account can also help you build a track record with the bank. If and when you do apply for credit, you’ll come to them as an existing customer.
How Can Low Business Credit Scores Be Improved?
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