< Back to AmerantBank.com
Business owner applying to an Amerant Business line of credit to establish a credit score
Business Banking

Understanding the Importance of a Business Credit Score 

When running a successful business, having a good credit score is just as important as having a solid business plan. However, many business owners overlook the importance of building and maintaining a solid business credit score. We will explore the significance of business credit and how it can impact your business’s success. 

What is Business Credit? 

Business credit is a measure of a company’s creditworthiness and financial stability. It resembles personal credit, but it specifically ties to a business entity’s financial health rather than an individual. Business credit is used to evaluate the risk of doing business with a company by lenders, suppliers, and other businesses. 

How is Business Credit Scored? 

Typically, businesses calculate credit scores on a scale of 0-100, with 100 representing the highest score. The most used business credit scoring model is the FICO Small Business Scoring Service (SBSS. This model considers credit history, payment history, and credit utilization. 

A company’s credit score can be affected by its size, age, industry risk, and public records such as bankruptcies or liens. These factors can have an impact on the creditworthiness of a company. It is important to note that business credit scores are not publicly available like personal ones, and they can vary depending on the business credit bureaus used. 

Why is Business Credit Important? 

Having a good business credit score is crucial for the success of your business. Here are some reasons why: 

Access to Financing 

Business credit is important because it affects your ability to get financing for your company. Lenders, such as banks and credit unions, use business credit scores to assess the risk of lending money to a business. A good business credit score can increase your likelihood of obtaining a business loan or credit line. It can also result in more favorable terms and interest rates. 

Building Credibility 

A good business credit score can also help build credibility with suppliers, vendors, and other businesses. When you have a strong credit score, it shows that you are a reliable and trustworthy business partner. This can lead to better relationships and potentially better supplier deals, which can ultimately benefit your bottom line. 

Separation of Personal and Business Finances 

Having a separate business credit score also allows you to keep your personal and business finances separate. This is important for several reasons. First, it can protect your credit score if your business runs into financial trouble. It can also help you track and manage your business expenses, which is helpful for taxes. 

How to Build Credit 

Now that you understand the importance of business credit, you may wonder how to build it. Here are some steps you can take to establish and improve your business credit score: 

Incorporate Your Business 

Incorporating your business as a separate legal entity is the first step in building business credit. Separating personal and business finances is vital for building a business credit score. 

Obtain an Employer Identification Number (EIN) 

An EIN is a unique nine-digit number assigned to your business by the IRS. You use it to identify your business for tax purposes. It is also required to open a business bank account and apply for business credit. 

Open a Business Bank Account 

Opening a business bank account allows you to keep your business finances separate from your finances. It also helps record your business’s financial activity. 

Apply for a Business Credit Card 

A business credit card is a great way to start building credit for your business. It can help you establish a credit history and improve your credit score if used responsibly. When applying for a business credit card, choose one that reports to the credit bureaus, as not all business credit cards do. 

Make Timely Payments 

Like personal credit, making timely payments is crucial for building a good business credit score. Late payments can have a significant negative impact on your score, so it is important to pay your bills on time, every time. 

Monitor Your Credit Score 

Check your business credit score often to ensure it’s correct and current. You can request a free credit report from each of the three major credit bureaus (Experian, Equifax, and TransUnion) once a year. You can also use a credit monitoring service to keep track of any changes to your score. 

How to Improve Your Business Credit Score 

If your business credit score is not where you want it to be, there are steps you can take to improve it. Here are some tips: 

Pay Off Outstanding Debts 

If you have any outstanding debts, paying them off can have a positive impact on your credit score. This shows lenders that you are responsible and can manage your debts effectively. 

Keep Credit Utilization Low 

Credit utilization is the percentage of your available credit that you are using. To maintain a good credit score, you should keep your credit utilization below 30%. This shows that you are not relying too heavily on credit and can manage your finances responsibly. 

Dispute Any Errors on Your Credit Report 

If you notice any errors on your credit report, it is important to dispute them as soon as possible. These errors can negatively impact your credit score, so it is crucial to have them corrected. 

Your Business and Amerant Bank 

Amerant Bank offers a variety of business credit cards and loans for its customers. The credit score needed for an Amerant business credit card, or loan may vary depending on the specific product and your business’s financial history. However, a good business credit score can increase the likelihood of approving you for a business credit card or loan. 

In today’s competitive business landscape, having a good business credit score is essential for the success of your business. It can help with money, make suppliers trust you, and keep your personal and business finances separate. By understanding the importance of business credit and taking steps to develop and improve your score, you can set your business up for long-term success. 

Are you in need of a business credit card or business loan? Apply with Amerant for financing options that suit your needs, whether you’re a commercial or small business owner. 

Editorial Team
< Back to All Stories