Corporate Credit FAQ

Business credit allows a company to obtain quick cash to meet business expenses, with an agreement to pay it back in the future, much like a bank loan. It is a vital part of many businesses, whether it’s a small startup or a large corporation. It not only provides access to corporate funds, but also offers security and stability. If you are new to the idea of business credit, read on to find out how it works and what it can do for you.

Why do you need business credit?

The most obvious reason for obtaining business credit is to have ready cash in your business whenever it’s needed. For example, when a company has a target of opportunity to add an additional product or service immediately, they can use this credit to cover initial expenses while waiting for funds from other sources.

Business credit also allows you to access instant cash without adding to your personal debt. This method, allows you to meet your business needs without negatively impacting your personal credit or adding to your personal debt.  You can also extend your cash flow and afford more business resources, pull down your interest rates, and improve your company’s credibility.

What are the advantages of business credit?

Simply put, business credit will give you more cash for your business.  Whether you need to buy new equipment or expand your product lines, it is easily one of the best ways to secure funds. It is also faster and more convenient than regular bank loans, and would not require personal credit checks, or personal guarantees for items such as the lease or purchase of company vehicles.

Another advantage of business credit is that you can separate your business from your personal assets.  Likewise, you can also distinguish your personal liabilities from those of the business.  Having credit available to your business allows you to better plan your business growth.

Having a positive business rating will allow you to get business credit cards, retail credit for those companies you deal with most often, positive lease rates for vehicles and equipment used by the company, lines of credit, real estate loans, the list goes on.

Where can I get scores for my business credit?

A company that scores businesses for granting corporate credit is called a business credit reporting agency. There are two such institutions in the United States, D&B and Experian. Financial institutions and lenders rely heavily on these two for information and advice on granting business credit.

D&B

D&B creates credit profiles using information provided by businesses. They rate businesses using a scoring system they call PAYDEX...  A High Risk status is reserved for businesses with extremely bad credit; companies in this category are unable to obtain credit. There are currently more than 70 million businesses enrolled at D&B.

Experian Business

Unlike D&B, Experian bases credit profiles purely on information provided by vendors. Its scoring system is called Intelliscore and is based on the company’s payment experience. It is one of the largest personal credit bureaus today, with more than 14 million businesses registered.

How do they rate my business credit?

Financial institutions use scores provided by D&B and Experian to determine one’s business credit. Each company uses different scoring systems. The following are the ones most commonly recognized by lenders.

PAYDEX Score: The PAYDEX Score, as mentioned above, is based on the company’s payment experiences. One needs at least five trade references reporting to D&B to obtain a PAYDEX Score. The scores range from 0 to 100, with 75 considered a good average.

Intelliscore: The Intelliscore is based on information provided by vendors only. Only two trade references are needed, both of which report to Experian. Like the PAYDEX, Intelliscore ratings range from 0 to 100 with 75 as the preferred rate.

DUNS Rating: The DUNS rating uses different rating schedules based on the company’s financial statements, employee size, and payment history.

How can I build up my corporate credit?

Building business credit is usually a lengthy process, requiring ample guidance and support. It is not uncommon for lenders to identify you or the company’s officers as personal guarantors – thus holding you liable – unless you know the ropes and how the whole process works. A good advisor can guide you throughout the process and help you get a good business credit score. Some of the things they can do for you include:

• Obtaining useful information about trade credit, scoring, and business credit reporting.
• Help obtain the information required by business credit reporting agencies.
• Apply for all the necessary registration numbers, such as the DUNS score, from D&B.
• Provide information from the business vendor, such as whether it requires credit check or personal guarantees.
• Help build up trade credit, which will appear on the company’s business credit report.
• Establish assets and corporate credit lines for large corporations (usually for an extra fee).
• Find a D&B senior update analyst who can give you a business credit profile, with a D&B Credit Builder, within 72 hours.

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