About Small-Business Credit Reports

Running a small business requires obtaining credit and loans from banks and suppliers. However, if your company is new, you won't have a history of paying your debts on time. When you apply for credit from your vendors or a lending institution, you want to show that your business credit report identifies you as a good risk and an established enterprise so that you will be approved for company terms.

Definition

If you run your business as a separate entity, such as a corporation or a limited liability company, your commercial credit report will be different than your personal financial history. When applying for a loan, trade terms or other credit, the lender will want to know how responsible your company is at paying its bills on time. Regardless of the risk that you are personally, your business will need to qualify for loans on its own.

Purpose

Starting out as a small business may require you to obtain loans for leased space, equipment, office supplies, employees, licenses and a variety of other business needs. Even if you have the money to open, you will need to buy your products or material before you start selling and making an income. The best way to buy from your vendors is by applying for a trade credit or line. This allows you to pay your suppliers after a certain amount of time, such as 30 days, in order to collect from your customers first and then pay what you owe. However, you will need to qualify to do this. A small-business credit report will be pulled by the vendor to determine if you have a history of paying your bills on time.

Dun & Bradstreet

Obtaining a Dun & Bradstreet number is how to start establishing business credit. The nine-digit number identifies your business to anyone who requests a credit report for your company. Once you have a D&B DUNS number, other companies report on your credit worthiness. Just as your personal credit history, your business report tells a prospective creditor if you pay your bills on time. It's important to keep your personal finances completely separate from that of your business to ensure that your credit report reflects your company activities to accurately portray your financial risk.

Paydex Score

Dun & Bradstreet reports your credit score to other companies and creditors by using a Paydex scoring system, which is different than that used for your personal credit history. Paydex scores range from 0 to 100, with 80 to 100 being the best score and the lowest risk. Spend a few months building your credit score by paying your suppliers right away and using your business credit card. After you have established a good score, apply for the loan that you need to boost your business to success.

References

• "Bloomberg Businessweek"; Time to Review Your Company's Credit Report; John Tozzi; October 2008
• Experian: How to Maintain and Grow a Healthy Business Credit Score
• Bankrate; Cash or Credit? How Startups Can Get Credit From Vendors; Robyn A. Friedman; January 2000
• Paydex Score
• Dun & Bradstreet: FAQs
• Dun & Bradstreet: What Is Business Credit?

Resources

• Dun & Bradstreet
• Dun & Bradstreet: How to Read the D&B PAYDEX Score