Businesses that do not spend to grow can become stagnant. Often, it is not cost-effective to spend cash on hand for major supplies, marketing and other business growth expenditures; rather, most small businesses need to borrow at some point. Your business’ credit ratings are important; poor scores mean higher borrowing interest. Because understanding your business credit report is so valuable, this overview of how to read one can be a lifeline when you need to borrow.
One section of the report outlines your business profile. This overview is quite inclusive, containing such elements as important members of the company, company location, contact information and other pieces of your business.
Your credit score is the key factor in determining your risk factor to lenders. Lenders use this to determine whether you can reliably make payments. It also provides a long-term outlook; lenders want to be assured you will not go under within the year.
Your payment history is compared to those in similar businesses over time. This section also provides detailed information about supplier relationships, including payoff time-frames, credit balances and notes related to the relationship. Here the report also gives a monthly and quarterly spending analysis.
Defaults and Judgments
If you have been given notice about past-due payments, at some point your outstanding bills will be sent to collectors, and liens will likely have been placed. These debts are itemized together, with each noting the liability and taxes owed.
Your business credit report will not act as your financial advisor. You would benefit from enlisting the support of a professional if your credit score is insufficient. Taking this step is not only important to your bottom line but is legally advisable. Manage this by working out a plan to pay your bills in a timely manner. You need to take care of outstanding balances, as well. Additionally, try to obtain larger lines of credit or open new ones. This may be challenging as a consequence of your scores.
Still, if your credit scores are insufficient, you need to take whatever action you can. The first step to doing so is to continually review your credit scores. It is worthwhile to pay for professional business credit reports, rather than using limited free services.
It can be scary to examine your business credit report if it is not as solid as it should be. By taking control of your credit, however, you will feel more in control of your business.