Top 4 Factors That Affect Business Credit of Companies - With 5 Key Statistics

Business Credit of Companies

Are you even slightly aware of the number of small-scale businesses in the US? It is a whopping 28.8 million enterprise according to Small Business Administration and still counting. Since SMBs don't have massive funds for the operation and growth of the company, they tend to earn it by acquiring more and more business partners. But the question is, how will you know that the enterprise you are giving credit to for trading purposes can pay your debts on time or not? Finding the answer to this question is vitally important for you as it determines the survival of your business itself. You may want to work with a particular organization for a specific reason. But, if they are not financially capable of paying your dues on time, it could push your establishment to bankruptcy. So, a critical question arises here, how to be economically safe while taking your company to the next level? You can get a business credit report from a trusted merchant.  

Though buying business credit reports of other companies might cost you more money than your expectations, but it is worth it. It's because you might not imagine how many dollars you can save by checking whether a company will be operational in the next 12 months or not by going through their credit report. Besides that, seeing the credit report of various companies before selling your products or services to them, you can know their current creditworthiness in a few minutes. How? A business credit report contains the company's basic information, director information, risk score, financial comparison, and credit potential. Thus, sifting through these details helps you decide whether you should lend money to a specific company or not. But, to make that decision, first, you need to get business credit report


Now that you know the importance of buying business credit reports for small and midsize businesses, it's time to shift your attention to the following topic:


What Factors Influence The Business Credit Report of Various Companies?


1. Frequency of Payments 


If your potential business partner has been in operation for several years, they must have done scores of commercial transactions to build a solid credit history. In that case, they would have bought products and services from multiple companies and paid them using electronic payments. So, if they would be paying their bills on time, it will reflect in their business credit report. And if they don't, that will also be visible in the document. So, based on the previous payments made by your potential company to another, you can decide whether to give them credit or not. 


2. Years in Operation 


When you get a business credit report of a particular company, you can also look at how long they have been in business. It plays an integral role in knowing their financial stability. If your potential partner's company is way much older, the chances are high they will have an established payment history. Through their business report, you can know whether they have a high or low credit risk. Based on that, you can decide whether to agree to their payment terms or not. 


3. Credit Utilization 


Do you know that wisely utilizing credit is pretty crucial for businesses? Many have found that if a company uses more than 30% of their credit, it negatively impacts their score. So, when you look through the credit report of your prospective business partners, you must check their credit utilization. If it's low, it's good, but you should reconsider giving them credit if it's high. 


4. Outstanding Debt  


Another imperative thing you should peep into business credit reports is whether a firm has had unpaid debts for a long time or not. If it is, the previous creditor might approach debt collectors to extract the money, and more importantly, it will affect their overall score. So, if you find a company that has high outstanding debt, you could deny their credit request politely. 


With that discussed, now it's time to get deeper insights into:


Top 5 Statistics That Shows Why Business Credit is Important


1. 27% of businesses claimed that they couldn't get adequate funding to grow their business in a survey conducted by the NSBA. 


2. In another study, they have found that 20% of small businesses don't get credit or loans from lenders due to poor business credit. 


3. 46% of small businesses utilize personal credit cards for professional use, according to research performed by MasterCard. 


4. Creditera reported some time ago that Dun & Bradstreet received 45 million business credit report requests in the first six months of the year 2013, whereas Equifax Commercial only 35 million. 


5. According to the Nav American Dream Gap Survey, 2015 – 45% of small business owners didn't know they have business credit, and 72% didn't know where to find that information. 


Our Two-Cents 

We hope you learned what factors affect the business credit of various organizations and the five instrumental statistics associated with it. So, if you are still thinking about whether to buy business credit reports or not, stop and order a business report from a well-established seller.

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