Few days back I have shared some important tips regarding small business loans at computergeekblog. And now today I will explain you importance of “Credit score rating”. Yes, if you are going to apply for business loan then you should be aware with the importance of your business credit scores. So Keep reading and subscribe us for more business related information.
A credit score is a numerical value of a person or business’s creditworthiness. Like private individuals, businesses also have credit scores which they have to favorably maintain while conducting the business. A credit score is calculated after a detailed analysis of the credit files. Generally we think of credit scores in terms of persons. If a person has a good credit score, the potential risk to lend to that individual is termed as less by financial institutions and banks. Same is true with businesses. Credit files associated with businesses are assessed and then the credit scores of the business are determined which in turn determine the creditworthiness of the business.
Credit Scores for Businesses
• When you keep the finances of business and personal assets separate, it means that you have to maintain a good creditworthiness personally as an individual and also a separate creditworthiness for your business. Having good credit scores for both is important while applying for business loans for your business.
• So monitoring both the credit scores is essential to keep the liquidity flowing in your business. Bad credit scores means higher interest rates for borrowing as banks are essentially taking more risks lending your business money. This makes running the business much more costly than it should be.
• All businesses have a credit score attached to them as there are credit files attached to businesses. This is true for large organizations as well as small businesses. Many small and medium scale business owners generally do not know that their businesses have a credit score. They just monitor their personal credit scores. For getting good bank loans at affordable rates for the business it is essential that even a small and medium business owner maintain a healthy credit score for the business.
• Finding out the credit score of the business and maintaining all the credit files associated with the business is a great idea.
• Many times what happens is that people do not tend to give importance to credit scores of the business. A business is established for profit and many times businesses tend to want to expand and enter into new sectors of business and
partnerships. For this they need to have good credit scores and also need cash inflows from financial institutions.
Maintaining good credit scores means better creditworthiness for the business and so for getting bank loans for the businesses it is essential to monitor the businesses credit scores.