Business Credit Education

Separating business and personal finances is not just an option, it's a vital step towards safeguarding your assets, building a strong credit foundation, and gaining control over your business's financial health.

Both businesses and individual consumers have credit scores that reflect how they’ve historically used credit. Lenders and others use these scores to help determine creditworthiness and make decisions based on what they see. Your Business credit score is based on different information than personal credit scores and use a different scoring system. Learn now to check your business credit score. How Do Business Credit Scores Work? Business credit bureaus use information from a wide range of sources to compile business credit reports, which are then used to generate business credit scores. Data in business credit reports may come from your business’s creditors; its vendors and suppliers; public records and court filings; and collection agencies. For instance, Experian business credit reports show data such as location and contact information, time in business, the company’s Standard Industrial Classification (SIC) and North American Industrial Classification System (NAICS) codes, annual sales and number of employees. It will also show any judgments, UCC filings or tax liens against your company and any accounts in collections. Finally, it looks at how you handle commercial credit payments on loans, credit cards, and bank or trade lines of credit. Each business credit reporting agency weighs the information in your credit report differently and uses its own unique method to calculate your credit score. For example, Experian calculates your business credit score based on: Credit: Number of trade accounts, outstanding balances, payment behaviors, credit utilization and trends over time Public records: How recent and how frequent any liens, judgments or bankruptcies are and how much money was involved Demographics: The number of years you’ve been in business, your SIC and NAICS codes and the size of the business Experian Business Credit Scores range from 1 to 100. As with consumer credit scores, higher scores signify better credit. Where Can I Check My Business Credit Score? You can check your Experian business credit score by purchasing a one-time copy of your credit report or signing up for business credit monitoring, including unlimited access to scores. Reasons to Check Your Business Credit Score Prevents fraud: Monitoring your business credit score can reveal potential fraud or identity theft. A new account you don’t recognize, an application for credit you didn't make, or inaccurate information could be a sign of fraudulent activity. Contact the credit bureau if you see anything amiss on your business credit report. Monitors business health: Your business credit score is an indicator of the financial health of your business. A good business credit score can open doors, giving you access to more credit, lower interest rates and better loan terms. Your business credit may be the deciding factor in whether you get approved for a lease or for trade credit. Regularly checking your business credit score gives you a sense of where your business stands and how successful your applications for credit are likely to be. Safeguards your personal assets: Without a good business credit score, you may need to personally guarantee business loans or use your personal credit score to apply for business credit. This could put your personal assets—and personal credit score—at risk if your business suffers a downturn and you can’t pay these bills. A good business credit score can help you get credit in your business’s name, protecting your personal assets. How to Establish and Build Business Credit Start establishing a business credit history by legally registering your business and getting an employer identification number (EIN) from the IRS. Open business bank accounts, leases, utility services and other accounts in your business’s name, rather than your own. You can begin to build business credit by making moves such as getting a business credit card and requesting trade credit from suppliers, then making your payments on time. For these payments to help your business credit score, you’ll need to work with companies that report to business credit bureaus. Not all of them do, but companies are often willing to do so if you ask. As with personal credit, paying your creditors on time is key to improving your business credit score. You should also check your business credit score regularly, making sure the information in your credit report is correct and current. Keep Your Business Credit Score Healthy Regularly monitoring your business credit score helps keep a pulse on the health of your business—but as a business owner, you already have a lot on your plate. For a convenient way to track your credit score, sign up for business credit monitoring services such as Experian’s Business Credit AdvantageSM. It provides alerts whenever your business credit score changes and early warnings of potential fraud to give you peace of mind. Plus you get unlimited access to your business credit report and score all year long. About the author Karen Axelton Drawing on 20-plus years of experience as a journalist, business magazine editor, and marketing copywriter, Karen Axelton specializes in writing about business and entrepreneurship. She has created content for companies including American Express, Bank of America, MetLife, Amazon, Cox Media, Intel, Intuit, Microsoft and Xerox.

Regularly checking your business credit score helps protect both you and your business in several ways. We cover three primary reasons in this post.

Nearly 9 in 10 consumers have read online reviews to determine the quality of a local business, and 39% do so on a regular basis.

As a small business owner, finding capital to build your business is one of your top priorities. But if you don't yet have a business credit history and your personal credit history needs some work, it can be difficult to get approved for most business financing options. You can still find a way to get a business loan with no credit check, but it will likely cost you more to do so. There are some business funding options you can pursue that may not require a business credit check. Here's what you need to know about those options and how to improve your chances of getting affordable financing for your company. How a Business Loan Differs From a Personal Loan Some new business owners use personal loans to start a business. Both personal loans and business loans typically require a credit check, but some business lenders may review both your personal credit score and your business credit history. If your business is new, or if you are a sole proprietor, your personal credit history will be more heavily relied upon. Business loans and personal loans differ in the following ways: Collateral: While most personal loans are unsecured, many small business loans require that you put up collateral. Additionally, many commercial lenders also require a personal guarantee, which means that you're personally liable to pay back the debt if your business can't pay. Building credit: Personal loans can be a great way to build your personal credit score, but small business loans are better if you want to build a business credit history. Keep in mind, though, that not all commercial lenders and financing options will report to the commercial credit bureaus. Do your research to make sure you're getting credit for your on-time payments. For both personal and business loans, there are some alternative financing sources that don't require a credit check at all. These loans typically involve some risk, and you’re likely to pay more in interest rates and fees on the loans. Business Financing Options That Don't Require a Credit Check Standard business loans from a bank, credit union or even online lender typically require a credit check. If your credit is less than stellar, these may be out of the question. However, there are other funding options to consider that might be a good fit for your needs. Microloans Microloans are small-dollar loans offered by nonprofit organizations that are designed to help new, small or disadvantaged businesses. These loans often don't require a credit check, and they may even charge low-interest rates or no interest at all. That said, they're typically reserved for startups, and you may need to meet other requirements, such as having family members and friends act as peer-to-peer lenders . Also, loans are typically capped at $10,000 to $15,000, depending on the organization. Vendor Credit If you regularly purchase supplies or inventory from vendors, you may be able to set up a trade credit account with them. This can allow you to pay your bill 30 days or more after your purchase date. In some cases, vendors will report your payments to one or more of the commercial credit bureaus including Experian. That said, some vendors may require a credit check—or at least a history of on-time payments with other vendors —so you may need to shop around to find one that will work with you. Invoice Factoring If your business gets paid by clients through invoicing, this could be worth considering. Invoice factoring involves a small business owner selling an invoice to a factoring company in exchange for an upfront payment based on a percentage of the invoice amount. In return, the factoring company takes over collecting the payment from your client, after which it pays the remaining balance minus fees and interest. Invoice factoring doesn't require a credit check because it's not technically a loan. It can be an easy way to get paid faster for work you've already done, but it's important to note that it could impact your relationship with your client, especially if they pay late or have a poor experience with the factoring company. Merchant Cash Advance A merchant cash advance (MCA) is also technically not a loan; rather, it's an advance on your future sales. In exchange for an upfront payment, MCA providers will take a percentage of your daily credit and debit card sales or a fixed daily or weekly payment from your bank account. MCAs can be easy to get, even with bad credit, because the provider is more concerned about your sales record than your credit history. That said, merchant cash advance APRs can climb into the triple digits if you're not careful, so it's generally best to avoid them in most cases. Make It a Goal to Build Business Credit for the Future Even if you need a business loan with no credit check right now, it's a good idea to prioritize building both your personal and business credit to widen your selection of options in the future. It can also help you qualify for lower interest rates and better repayment terms. Review your personal credit report and credit score to see what steps you can take, such as paying down credit card balances, getting caught up on past-due payments, disputing inaccurate credit report information, and more. You may also opt to get a secured credit card to add a more positive payment history to your credit file. For your small business, make sure you're working with lenders that report your payments to the credit bureaus. Many lenders that don't check your credit don't do this, so you may need to establish your business credit profile before you can start building your business credit. As with your personal credit, it's important for your business to pay its bills on time and avoid overextending itself on debt payments. While you might have a hard time getting a bank loan, you can start with business credit cards and vendor credit and then build from there. About the author Ben Luthi has been enthralled by personal finance and travel ever since he spent time abroad in college. He has worked in financial planning, banking and auto finance, and writes about all aspects of money. His work has appeared in Time, Success, USA Today, Credit Karma, NerdWallet, Wirecutter and more.

December 3 is International Persons with Disabilities Day. Our podcast this week featuring a discussion with Lynn Wehrman of Minneapolis-based WeCo.

In this business credit education post we cover the top factors that impact business credit your business credit score

If you're a small business owner, tradelines can be one of your most powerful tools for establishing and strengthening that credit profile. A tradeline is an account between businesses that acts like a loan or line-of cash from vendors to companies without any security involved.

We get this question on the Small Business Matters blog quite often — "How can I report my customers' data to credit bureaus like Experian?”  Many small business owners have questions about how to report data to credit bureaus as a business. So we invited Robbin Miske-Palmer from our Data Sourcing team to explain how that works, and what you can do as a business owner to give your customers the credit they deserve. Full File Reporting Many small businesses misunderstand that Experian requires reporting on all customer accounts, not just individual delinquent customers. This "full file reporting" benefits both businesses and their customers. Benefits for Businesses Improved Customer Creditworthiness: Reporting positive payment history helps customers qualify for better credit terms, encouraging their growth and potential spending with your business. Early Detection of Delinquency: Monthly reporting automatically reflects late payments, enabling early intervention to resolve issues and potentially avoid bad debt. Enhanced Vendor Reputation: Reporting demonstrates responsible credit management, fostering trust with other businesses and potential partners. Benefits for Customers Accurate Credit Reports: Reporting ensures accurate credit reports, reflecting good payment habits and contributing to higher credit scores. Access to Credit Opportunities: Positive credit history facilitates access to trade credit, loans, and other financial resources necessary for business growth. Encouragement of Responsible Credit Management: Reporting incentivizes customers to maintain good credit standing, benefiting their overall financial health. Getting Started with Experian Reporting Reporting business data to Experian is free, but requires meeting certain criteria: Membership Approval: Businesses need to apply and agree to Experian's terms and conditions. Monthly Full File Reporting: Timely submission of encrypted data files containing information on all customer accounts is mandatory. Standardized Format: Data files must follow a consistent format every month, simplifying the reporting process. Additional Resources Visit our website for detailed instructions and information on Experian business data reporting. Note that this is specific to reporting on businesses, not individuals. Reporting your customer's business data to Experian offers significant advantages for both your business and your customers. By facilitating responsible credit management and ensuring accurate credit information, this practice fosters a healthy business environment for everyone involved. Links: How to Report to Credit Bureaus as a Business Reporting your customers' business data is free but does require credentialing (Membership) approval.  Click here to find information on reporting client/customer data to Experian. Please have ready the following information when you contact Experian - legal company name, business phone number, company address, contact email address, and estimate on the number of businesses to be reported. Note: this is for reporting businesses only, not individuals. If you need to know how to report consumer data to Experian, click here. The following is a lightly-edited transcript of our interview. Gary: And so Robin could you tell us a little bit about what you do here at Experian? Robbin: I'm in the data sourcing department and one of our main objectives is to help businesses onboard to Experian, to be able to report their data, their business data to Experian. Gary: One of the questions I wanted to ask you and what we get asked about a lot on our blog and on social media, is from small business owners and that is how to report data to credit bureaus as a business. And, one to one, I think there may be some misconceptions about how Experian handles that, and I was wondering if you had any feedback on that question that we could help them with. Robbin: Absolutely. So typically, we'll be contacted by a business looking to report just one particular tradeline. But for reporting business data to Experian, it is a full file reporting. And what that means is that you report on all of your accounts. So, with those good accounts, you report those, delinquent, slow pay. And the reason that you do that versus one particular account is that all of your businesses get the advantage of being reported. Robbin:  So, if you are a small business, having your vendors report on you does affect your credit report. So, if you're paying as agreed, we want to certainly get that information on the credit report, so you can help those businesses that you work with. And, if you have to look at your slow-paying customers, you certainly want to be able to catch them sooner than later. So being able to report that full file, once they become delinquent you have that opportunity to speak with them and get them back on track since this is going to be something that's shared with the credit bureau. Gary: So, if they're reporting in an automatic way, let's say on a monthly basis to Experian, that transaction that shows the original invoice going out and the fact that it's 90 days or 60 days past due, that's automatically being reflected then in the data. Am I right? Robbin: Yes. Gary: And if the business owner at that point they want to get paid is it then up to commercial collections to go out and get that payment made? Robbin: They can certainly use those services, and Experian does accept collections data as well as trade data, but they also have the opportunity to discuss with their clients to say, "Hey, we do report this information to Experian, we want to be good stewards of your information, make sure that information gets to the credit report." Gary: What I got from your last statement was that with the full file reporting, that you know there are positives and negatives too for the business owner. The customers of your business are getting the credit that they deserve, right?  Because you know, if they're paying you on time that's then being reflected in their business credit score. Robbin: Absolutely, and it's a benefit to the vendor to report that information because as their customers grow, and are able to access trade or other means of credit, they're able to grow. So, you certainly want to encourage their growth so that they can spend more with your vendor. Gary: Okay. Excellent. So now, if I'm a business owner, and I have not been reporting to Experian as yet, but I want to. What's their course of action, how do they start? Robbin:  It's free to report business data to Experian, but we do have some guidelines that we have to meet. So, they do have to be a customer of Experian, which means there's an application and an agreement that must be signed. It is a monthly data reporting of that full file. You must be able to commit to sending that data to us in an encrypted fashion. And we have the tools already built to be able to do that. We just need your commitment that you're going to send the layout, format, and file, once a month. That layout format stays the same each month. Certainly, you're going to be adding customers, or somebody gets to a final status like they have paid in full, or they're no longer a customer you can report them through that final status, but it should be a monthly reporting that comes to us every month the format and layout stays the same. Gary:  Excellent. Well, I want to thank you very much for taking time out today to talk to us about this Robbin and look forward to another opportunity to chat about data with you.