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So with your business model up and running it is time to talk about how to establish business credit. Business credit follows many of the same rules that personal credit does, except with a couple of unique twists that are the result of the credit being pulled from a legal business entity rather than a person. Understanding how business credit works is key to knowing how to establish business credit and how to build your credit score.
The first thing that you have to understand is that business credit encompasses more variables than personal credit. Whereas personal credit merely factors into account your repayment reliability and your assets, business credit weighs very heavily upon the profitability and stability of your business. Being able to show a long period of black is absolutely key to getting a nice big business loan when the time comes.
Business credit is based mostly on the Paydex score, which is issued by Dun & Bradstreet. The Paydex score gives you a credit rating of your business on a scale of 0-100, with 75 being considered excellent. As suggested earlier, it focuses on your repayment reliability, as well as your business’s profitability.
The last thing you need to know about how to establish business credit is that having large personal assets are very useful for the purposes of securing a loan. While this may sound like a breach of personal credit and business credit, many business loans are nonetheless often secured by listing real estate holdings or stock options.
