5 Factors That Affect Your Business Credit

What makes up your business credit score?

What gives you the best chance of getting a loan?

Here are a few factors that play into your business credit picture, and how you can make the most of them:

1. Payment History:

This is an important part of your business credit profile. It is the basis of your D&B PAYDEX score. Vendors will look at your whole credit picture and your PAYDEX is a part of that.

2. Blanket UCC Filings:

Pay attention to the order in which you get certain types of loans, and which UCC filings the lenders will file. Some lenders may file a blanket UCC filing. This essentially says they have an interest in ALL your assets. These blanket UCC filings will then take precedence over any later ones. This drastically reduces your ability to get credit elsewhere.

What you can do?

Plan your credit with care and negotiate UCC filings according to your needs.

For example, if you need particular assets excluded from a UCC filing to use as security for another loan, explain that in advance. That way, you can get those items excluded from any blanket filings. Or get the loan or account with the more specific UCC filing first. Some experts recommend opening accounts with competing UCC filings at the same time and negotiating the details with each party simultaneously.

3. Company Financials:

With D&B, it’s important to make sure your financials in your credit file are up to date. You may be surprised how often this occurs. If they are not, it could negatively reflect on your company when the lender compares available data.

What you can do?

Update your financials on every credit reporting bureau. Make sure they reflect your current circumstances. And plan to update often.

4. Company Legal Structure:

Having an LLC or corporation versus a partnership, etc. can also affect business credit. Lenders are less likely to loan money to sole proprietorships and partnerships. They prefer corporations and limited liability companies.

What you can do?

Incorporate! If you aren’t incorporated, you should be. The advantages go far past your ability to simply get credit. A robust corporate credit profile tied directly to your company's EIN is the "secret sauce" door opener to corporate funding without personal guarantees.

5. Other Factors:

There are other factors affecting your ability to get credit, like the amount of debt you already have, and how heavily invested you are in your company. Even your personal credit can play a role in your approval or denial.

Here we’ve covered a mere five of the 125+ variables that lenders consider when deciding whether to approve or deny your funding request. While this may seem daunting, remember you can directly influence, control, and improve every one of these factors.

In short, the better the all-around picture you can paint, the better your chances of getting loan approvals.