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A company’s business credit is its perceived ability to make good on financial obligations according to the terms of its contracts. This is often expressed as a collection of scores and ratings found in a business’s credit file. A strong business credit file can help put your potential customers, lenders, and suppliers at ease, while poor scores and ratings may impact your ability to win contracts, result in higher interest rates on loans, and otherwise limit growth.

What Is a Business Credit Score? Your business credit score is a number that tells lenders whether or not you are a good credit risk. The higher the number, the better the score. This is similar to a personal credit score and the same companies that manage personal credit scores-TransUnion, Equifax and Experian-also manage business credit scores. Unique to the business arena, however, is the Dun & Bradstreet Paydex score. The Paydex informs lenders how likely you are to pay your bills on time. Those who pay early get the highest scores.

Types of Credit - A regular term loan is a popular choice for business lenders. This is a lump sum of money that you pay back over a certain time period. An SBA loan is a loan that the Small Business Administration backs, which offers lower interest rates. A business credit card is an account that allows you to make purchases online or in stores, paying the money back later. A line of credit is when your bank approves you for a certain amount of money, but you only pay interest on the money that you take out.

Business Credit Mix - Having a variety of types of credit available to you, what is referred to as your business credit mix, can help you improve your business credit score. This means you should have some term loans, which you make the same payment on every month, along with with some revolving credit loans that you pay a different amount on each month.

 

Terms of Credit - When signing a contract to receive credit, you must understand the terms of the loan. The annual percentage rate, or APR, is the percent of interest rate you pay back. You must also understand the length of time for repayment. In some cases, you pay more if you do not repay the amount back in full each month.

 

Equipment Financing and Leasing - Often one of the first forms of credit that a small business receives is equipment financing or leasing. The equipment company allows you to make payments over a certain period of time when you finance. If you lease the equipment, you pay a smaller amount and then have the option to purchase it at the end of the lease term.