If you are
thinking about getting a small business loan, you are not alone. According to
the Federal Reserve Bank of New York, 43% of small businesses nationwide apply for new credit annually. Getting a small
business loan can be challenging. In June 2021, for example, small business loan approval rates at big banks
were less than 19%. While approval rates at smaller banks are higher, about
half of those applying for credit at small banks or credit unions are denied.
Before applying
for a loan, check your
small business credit score to see how the business credit reporting
agencies evaluate your business. Since you want to present your small business
to lenders in the most favorable light, checking your business credit score helps you
identify any problems areas that you may be able to resolve before submitting
your application.
Four Reasons To Check Your Small Business Credit
Score
Armed with the
information found on your business
credit score, you will understand how lenders will view your business’
financial health. This is just one of several reasons you should check your
business credit report regularly.
1. Find Out Your Risk Profile
When banks or
lenders are underwriting small
businesses should get loans, they will first look at your business credit score.
The 2020 Small
Business Credit Survey from the Federal Reserve Bank shows that 65% of small businesses are in the low-risk category,
so you need to ensure your business
credit score puts you on an even playing field.
According to the
Federal Reserve Bank, to be considered low risk, you generally want to have a business credit score
between 80 and 100. A score between 50 and 79 generally rates you as medium
credit risk, while anything lower than 50 is considered high risk.
2. Fix Any Credit Blemishes
Checking your small business credit score
can help identify any blemishes on your credit history. For example, if you
have any outstanding debt that is past due, pay that off first, before you
apply for a loan, so the credit reports show you are current.
Any accounts
that have been sent to collections will remain on your credit report for seven
years after the default. While you can request collection agencies to remove
account collections from your report with a pay-for-delete letter, the credit
reporting bureaus discourage this practice and say it may not impact your business credit score.
3. Catch Any Mistakes
You should also
review your business credit report for accuracy. There can be errors that occur
when one of your suppliers or lenders mixes up accounts or the credit bureau
mixes up a tradeline with a business with a similar name.
By examining
your business credit report, you can catch errors before they cause you
problems when applying for a loan.
Other things to
check are the number of years you have been in business and the age of your
tradelines or credit cards. The longer you are in business and have used credit
responsibly, the better your business
credit score will be.
If you do find
errors, you will need to initiate a dispute with each business credit bureau
that shows inaccurate data.
4. Look For Fraud
Identity theft
is big business for criminals. The Insurance Information Institute estimates
that losses from identity theft exceeded $712 billion in 2020.
Identity theft does not just affect individuals — small businesses are often
prime targets of identity theft.
Criminals
impersonate businesses to take out loans in your name or apply for lines of
credit and rack up bills. One of the first places you may see this activity is
on your business credit report. Suspicious activity or multiple requests for
credit may hurt your business
credit score.
How To Check My Business Credit Score
Checking your business credit score is easy at Command Credit. You can go to CommandCredit.net and select Self-Serve Business Credit Reports. You can choose from different types of business credit reports from the three major business credit reporting agencies:
- Dun & Bradstreet
- Equifax
- Experian
View samples, make your selection, fill out some basic information about your business, and you can pull your business credit report instantly.
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