Why an Experian Business Credit Report Is Not Enough to Assess a Business’s Creditworthiness

by Kristen White Blogger

Building business credit is a primary responsibility for any responsible business owner. Even small business owners who have struggled in the early stages of their independent growth must grow a positive business credit rating as their business grows. Unfortunately, not all businesses follow this important rule.

According to a recent survey, awareness about business credit was extremely low amongst small business owners. Of all the small business owners that were surveyed –

· 45% stated they had no clue about their business credit score.

· 72% of respondents stated they do not know where and how to find their business credit information.

· 82% stated they could not interpret their business scores.

All major financial institutions assess business credit scores before lending any amount. The entities that suffer the most are small business owners. That is because they lend money to suppliers and customers without assessing their business credit scores. While savvy investors and established financial organizations know how to check business credit, smaller business owners do not usually have the tools to determine which suppliers, businesses, or customers deserve their money and partnership.

Importance of Small Business Credit?

Similar to how all adults have personal credit scores, small businesses also have credit scores. These scores determine -

· How financially responsible a business is.

· Whether the business has negative public records (for instance, liens or bankruptcies).

· How much credit the business holds.

· Whether the business has significant outstanding balances.

· The business’s payment and repayment habits.

Other demographic information, for instance, business age, location, years on file, etc., are also revealed on these credit reports.

Why Small Businesses That Frequently Lend Money Need These Reports

Partnering with a business that has strong business credit assures small business owners the assurance of repayment. They know that the business they have lent money to has the capacity to repay the amount. If banks, investors, and large companies assess every business’s creditworthiness before setting loan terms, why should not smaller businesses do the same?

Last year, 36% of small business owners were denied funding because of their negative credit scores. Where do these small businesses with poor credit scores turn to? Vulnerable business owners who do not have the resources to assess a business’s creditworthiness! Partnering with a supplier or a business that has too much debt or poor credit history can ruin a small business.

Calculating Business Credit Scores in a Simple Fashion

There are several independent business credit reporting agencies that not only test a business’s Experian Business Credit Report but also assess other details. These credit reporting agencies check the databases of major credit bureaus like Equifax, Dun & Bradstreet, and Experian. Unlike Equifax business credit scores or Experian’s scores, the reports are much more detailed and easy to read.

Business owners can read just one sheet containing complete credit-related details about a business or supplier they are interested in doing business with. Since each credit bureau (Equifax, Experian, and Dun & Bradstreet) provides slightly altering information, the clear analyses that these independent business credit reporting agencies are much more beneficial to the average small business owner.