Unlock Business Credit for Financing Success

Many small business owners overlook business credit in the early stages, but understanding and managing it can be a game-changer for long-term growth. It’s not just about getting approved for loans. Business credit is key to:

• ​Building long-term financial stability
• ​Unlocking better financing options
• ​Staying competitive in tough markets

According to the Small Business Administration (SBA), 20% of small business loans are denied due to poor business credit. And 86% of small business owners rely on personal credit for financing.

Additionally, relying on personal credit can hurt your personal financial health and limit access to SBA loans and other funding options.

In this guide, experts Ty Crandall from Credit Suite and Chris Decker from Dun & Bradstreet share actionable tips on how to understand and monitor your business credit profile.

Let’s explore why business credit should be a top priority for you.

The Critical Role of Business Credit

Even the best business ideas can hit roadblocks if your credit profile doesn’t measure up. Fortunately, business credit can help you:

• ​Access funding without draining cash reserves
• ​Qualify for better terms and higher limits
• ​Build trust with partners, suppliers, and lenders

When you start building a credit history with vendors, credit issuers, and lenders, you're opening the door to better funding opportunities. Instead of relying only on cash, you’ll have access to financing options that can help your business grow.

If you pay off that credit before interest kicks in, you’re giving yourself the flexibility to reinvest those savings right back into the areas of your business that need it most.

Having solid business credit can give you a serious edge in everyday business decisions. For example, it can help you:

• ​Request higher trade credit limits from suppliers
• ​Negotiate better lease terms on equipment or property
• ​Secure lower premiums on insurance policies
• ​Get more favorable freight and payroll terms
• ​Win contracts that require a strong financial profile

These are real competitive advantages that can set you apart from your industry.

How can business credit help me grow?

Stability and strategic growth: Good business credit scores and ratings demonstrate stability, which may help you access capital when needed.

Mitigating risk: Use business credit data to make informed decisions about partners and suppliers. They can do the same with your business.

Long-term Financial Strength: A good credit history means lenders and credit issuers are more likely to lend to you. Building a credit history with vendors, issuers, and lenders helps you access better financing options without always relying on cash.

Improve Business Valuation: Good business credit can improve your business’s valuation through better financing options, higher credit limits, favorable vendor terms, increased trust, and risk mitigation. This makes investors or buyers more willing to work with you.

Showing stability and demonstrating that you're not a risk can help you to secure capital and open lines of credit for your business.

Your D&B Scores and Ratings Explained

Your Dun & Bradstreet (D&B) profile is made up of several scores and ratings, each measuring something different. Unlike personal credit, which usually revolves around a single number, business credit is more layered.

As Christopher Decker from Dun & Bradstreet puts it:

Understanding and monitoring your business credit scores can give you a competitive edge. It allows you to identify areas for improvement and take proactive steps to enhance your creditworthiness.

D&B breaks scores down into two main types:

• ​Performance-based scores, which look at how your business has done in the past
• ​Predictive scores, which estimate how your business is likely to perform in the future

Both types are important—and together, they give lenders, partners, and suppliers a well-rounded view of your business’s financial health.

Let’s take a closer look at the six D&B scores and ratings, what they mean, and how you can use them to strengthen your credit profile over time.

PAYDEX® Score

This score measures a company's payment performance. It ranges from 0 to 100, with higher scores indicating timely payments. A PAYDEX Score of 80 or above is generally considered good.

A high PAYDEX® Score can lead to net-30 or net-60 payment terms, offer improved cash flow and increased trust from suppliers, and contribute to loan terms and lower interest rates from lenders.

A low PAYDEX® Score can mean difficulty securing favorable payment terms from suppliers, lead to higher interest rates on business loans and credit, and provide limited access to trade credit and financing options.

What factors should you consider?

• ​Always repay your debts on time or ahead of schedule.
• ​Encourage suppliers and vendors to report their payment experiences.
• ​Regularly monitor your PAYDEX score for any discrepancies.

Delinquency Predictor Score

This score predicts the likelihood of a business becoming delinquent on its payments. It helps lenders and suppliers gauge the risk of late payments or defaults. The score range moves from 101 to 670, with higher numbers representing a lower probability of severe delinquency. On a scale of 1 to 5, a DPS of 1 suggests a low chance for delinquency and a DPS of 5 suggests a high chance of delinquency.

What factors should you consider?

• ​Keep tabs on specific factors affecting your business score from your D&B Credit Insights dashboard.
• ​Securely sync your business bank account to potentially impact your Delinquency Score (within your D&B Credit Insights product).
• ​Ensure bills are paid in a timely manner.

Failure Score

The Failure Score predicts the likelihood a business will seek legal relief from creditors or cease operations without paying all creditors in full over the next 12 months. D&B uses numbers from 1 to 5 to show the risk level. If a business is in group 1, it has a low chance of failing, while group 5 means it has a higher chance of failing.

What factors should you consider?

• ​Integrate your banking account via Plaid to potentially impact your Failure Score.
• ​Sign up for alerts to be notified of changes to your business credit profile.
• ​Keep tabs on your UCC Filings Report.

D&B Supplier Evaluation Risk Rating (SER Rating)

This rating helps predict the chance a supplier will become inactive in the next 12 months. This score ranges from 1 to 9; the lower the score, the lower the perceived risk.

What factors should you consider?

• ​Pay attention to your public filings including suits, liens, judgments, and UCC Filings.
• ​Ensure business financials are kept up to date.
• ​Maintain regular focus on exact factors affecting your individual business score.

D&B Rating

The D&B Rating is the overall assessment of how your business performed in the past. This rating considers economic factors, firmographic information, public filings, and payment experiences if you are so inclined to remit financial statements.

What factors should you consider?

• ​Make it a point to pay your bills on time.
• ​Work with lenders that report payments to Dun & Bradstreet.
• ​Submitting your company’s financial information directly to Dun & Bradstreet.
• ​Routinely checking public records for inaccuracies.

What if my D&B Rating is undetermined?

Companies often have an undetermined D&B Rating due to two main factors: employee count and payment history. If your Paydex Score is absent but your employee count is present, the score may be undetermined.

The Paydex Score relies solely on trade data, so without trade reporting, a score can't be determined.

To avoid an undetermined rating, ensure all your basic firmographic information is up to date and current. The DNB rating requires at least three payment experiences, one on terms.

D&B Max Credit Recommendation

The D&B Max Credit Recommendation reflects delinquency and compares your business’s risk profile to peers in your industry. It also helps you understand how much business credit, or trade credit, you can extend to your customers. It’s an important component of a comprehensive credit assessment.

What factors influence this recommendation?

Industry, employee size, and risk make up a matrix of recommended credit limits, which are segmented first by industry, then employee size, then by Dun & Bradstreet’s assessment of overall risk—high, moderately high, moderate, moderately low, or low.

Example: if you are looking to grant credit to a construction company with 20 employees that Dun & Bradstreet assesses as moderate risk, recommended limits would be suggested based on the historical credit patterns of other companies that share that industry, size, and risk profile.

A strong business credit score not only helps in securing financing but also builds credibility with suppliers and partners. It's a reflection of your business's reliability and financial stability.

Ty Crandall from Credit Suite

Strategic Benefits of Building Business Credit

Building business credit is crucial for small business owners and entrepreneurs aiming for growth. Here are some benefits to doing it effectively.

Generally, having more of the right payment accounts in your D&B credit report leads to higher credit recommendations and limits. This means lenders are more likely to trust your business and offer you better credit terms.

Continuously adding and maintaining accounts in your D&B credit report is essential for securing funding. A strong credit report directly affects your ability to obtain loans, making it easier to get the financial support you need to grow your business.

Business Insurance is another critical aspect. Many entrepreneurs underestimate the insurance needed to operate effectively. Insurance providers often base policy eligibility and rates on your D&B credit quality, making it vital to maintain a strong business credit profile.

Suppliers and contracts also rely on your business credit. For example, an over-the-road trucker client saw an increase in contracts as her D&B credit profile improved. Better credit led to more contracts and substantial credit lines with suppliers, fueling her business's growth.

Use tools like Credit Insights Plus to submit vendor statements, utility bills, financial statements, or business banking statements to Dun & Bradstreet for review and possible inclusion.

In summary, a strong D&B credit profile can open doors to more contracts, better insurance rates, and increased funding opportunities, all of which help businesses grow.

How Can I Get Started with Business Credit?

To get started with business credit, ensure you have your tax ID and legal structure in place. Get your D-U-N-S Number to set up your business credit reports. Set up tradelines that you know report to D&B and are meaningful to your business.

Use Credit Insights Free to get alerts when specific scores move up or down. See your actual scores change and how much with Credit Insights Basic.

With Credit Insights Plus, you can submit your current payments for review and possible inclusion as entries in your Dun & Bradstreet credit profile. You can submit your bank statements and financials to potentially include them, too.

Working with Dun & Bradstreet, you can get your D-U-N-S Number, add existing accounts to your credit profile, and get your PAYDEX Score issued once you have three approved accounts reporting.

See also: Five mistakes to avoid when trying to build business credit.

Free DUNS Manager

As a business owner, it's essential to ensure that all your general information—like your legal company name, DBA, address, and phone number—matches your account setup. Mismatched data can make it difficult for Dun & Bradstreet to align information from companies with your profile.

Use the free D-U-N-S Manager portal to keep your information up to date and ensure accurate matching with trade tape suppliers. Dun & Bradstreet shares data with over 15,000 entities globally, so correct matching is crucial.

When companies report, you may need to pay them within a certain timeframe or receive an invoice before they add you to their trade tape. Payments made with credit or debit cards might be counted as cash experiences, not terms.

The more information you include in the history and operations sections of your Dun & Bradstreet profile, the better. Your credit report will influence how companies view your services using Dun & Bradstreet's tools or the online business directory.

Takeaways on Business Credit

Managing business credit is crucial for your business's success and resilience. Establishing a Dun & Bradstreet credit file, monitoring scores, and building a strong credit history can help you secure financing, manage cash flow, and unlock growth opportunities.

On the other hand, poor business credit can lead to loan denials and reliance on personal credit, which can harm your financial health.

Consult experts, stay informed about your scores, and make strategic decisions to enhance your financial health. This will position your business for sustainable growth.