how business credit determined
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What is business credit?

Small business credit provides a summary of the company’s financial health, including the business’s payment history on financial obligations and details about past revenues and vendor relationships. The information provided regarding the business’s credit history is used to determine the creditworthiness, or ability to meet financial obligations, of the organization.

Business credit history is the primary way other entities, like lenders, investors, or new vendors, predict future behavior and make important decisions like:

  • Whether to sell products to you on credit
  • If the business qualifies for business financing
  • If your business would be a good investment
  • If personal finances will be considered for business financing options
  • Whether to lease office equipment to you
  • What repayment terms and interest rates to assign to loan offers
  • How your small business compares to the market industry growth

How is business credit tracked?

Creditors and vendors report your business’s financial transactions to business credit bureaus, who then compile the data into a business credit report. Business credit reports are then made available to be purchased by anyone that wishes to review them. The data collected in the report is used to produce a rating, or credit score, that represents the financial behavior of the business.

What’s in a business credit report?

The business credit profile in a credit report includes, in addition to the credit score, background information about the business’s organizational structure, including any changes in ownership. The report also lists any pending or closed liens, judgments, and bankruptcies reported in public records, along with the company’s financial information and banking and collection history.

What is the risk score for a business?

All the information in the credit report is used to generate a risk score that predicts how likely it is that a creditor will be paid back. There is more than one type of risk score, or credit score, for businesses, as different credit bureaus generate different types of credit scores. The most commonly used in business financing decisions is the FICO score, created by the Fair Isaac Corporation (FICO.

There are different types of FICO business scores. When reviewing the credit of a small business for the purpose of determining financing eligibility, the FICO SBSS score, or FICO Liquid Credit Small Business Scoring Service, is typically used. The FICO SBSS Score encompasses both the business credit history and the personal credit history of the small business owner to produce a rating between 0 and 300. FICO SBSS scores closer to 300 are considered good credit and show lenders, potential investors, and creditors how likely the business is to repay its financial debts according to the loan terms.

What are the three major business credit bureaus?

As soon as a business legally registers a business name with the state and obtains a tax identification number (TIN), similar to an individual’s social security number (SSN), and an employer identification number (EIN) from the IRS, they begin to build business credit. Credit bureaus are the business credit reporting agencies used to organize credit data for all types of businesses including sole proprietorships, limited liability companies (LLCs), partnerships, and corporations. There are dozens of credit bureaus, but there are three credit bureaus considered the most comprehensive and reliable.


Equifax is a popular credit bureau that banks, lenders, and other credit analyzers rely on to evaluate the creditworthiness of a small business. Equifax reports on consumer credit data and generates a business credit file. The business credit reports produced by Equifax are unique because they include a complete 12-month payment trend in comparison to similar businesses in the same industry. The trend is called the payment index, which is just one of the ratings Equifax reports. The major scores produced by Equifax include:

  • Equifax Business Credit Risk Score – Rates the business on a scale of 101 to 992, with a higher score representing higher risk and lower scores being considered good credit. The credit risk score predicts the business’s likelihood of incurring a delinquency greater than 90 days.
  • Equifax Business Failure Score – Ranges from 1000 to 1610, where a lower score indicates a lower risk for financing providers. The failure score is used to predict the likelihood of bankruptcy in the next year.


Experian Business Credit is another one of the three major business credit bureaus. While the information reported by Experian is like information reported by other bureaus, they are unique because they do not allow businesses to self-report any data. Experian is most known for its Intelliscore Plus score, which rates businesses between 0 and 100. The Intelliscore was recently revised and labeled the Experian Intelliscore Plus V3, where scores range from 300 to 850, like personal FICO scores. With scores produced by Experian, higher scores represent good credit and less risk for the lender.

Dun & Bradstreet

Dun & Bradstreet (D&B) is one of the oldest credit bureaus in the United States, having been founded in 1841. Dun & Bradstreet requires that businesses register to receive access to credit services and view the information reported in the D&B credit reports. Once a company registers, which can be done for free, it will receive a D-U-N-S number, which acts as the business’s unique identification number.

Dun & Bradstreet offer several different types of credit reports and credit scores, including the delinquency predictor score, viability rating, overall business risk score, and financial stress score. The D&B credit score most often used is the PAYDEX score, which rates businesses on a scale of 0 to 100.

How is business creditworthiness evaluated?

While the business credit score is the primary tool used to determine the creditworthiness of a business, it is not the only factor considered. A small business, whether a startup or established, is made up of much more than just its credit score, so factors like the amount of time the business has been open and growth patterns of similar entities are also considered. Lenders may request any of the following documents when evaluating creditworthiness during a financing application process.

Financial statements

Financial statements may be required by a traditional lender, like a bank or credit union, or an alternative lender if the business applies for any type of credit. Most underwriters will use the business’s Income Statement and Balance Sheet to understand cash flow and net worth.

Bank statements

The date a small business opens a business bank account is often used to determine the time in business and verify cash balances and business expenses reported in the business finances.

Debt schedules

A small business’s debt schedule reveals the total amount of debt, or financial obligations, the business is making payments on. Lenders use the debt schedules to determine if the business can afford an additional monthly payment.

Income tax returns

It is common for lenders to request two years of income tax returns, which are used to view annual revenue and taxable income of the borrower.

Personal credit score

New businesses, or startups, that do not have the required documents may need to provide the personal credit report of the small business owner. The business funding may still be issued to the business, but will typically require a personal guarantee from the founding entrepreneur.

Benefits of good business credit

Building and maintaining good business credit is very important for small business owners. Good business credit increases the borrowing power of the company as well as providing the following benefits:

  • Qualify for small business loan options, including government-backed loan programs
  • Save money on insurance premiums
  • Receive higher credit limits and lower interest rates on credit cards
  • Increase the value of the company to be more marketable to buyers

How to improve creditworthiness

It is important for entrepreneurs to know exactly where their business stands when it comes to creditworthiness. This will allow them to select the right lender to work with and what type of loan products to pursue. Small business owners can check their business credit score for free at least once every year. If you feel that there is room for improvement in your business score, consider implementing the following strategies.

Make timely payments

Be sure payments to vendors, financing companies, and financial institutions are made on time. Late payments can result in late fees and derogatory marks on the business credit report. Some creditors will also give discounts for businesses that time payments before the due date. This benefits the company’s credit score and its profitability. Dun & Bradstreet, and some other credit bureaus, will increase the credit score of a business if their payment history shows that they make payments to creditors and vendors ahead of schedule.

Have available credit

Credit utilization has a significant impact on a business’s credit score, so avoid maxing out credit card limits and lines of credit. If a business consistently uses more than 30% of its available credit, they are considered higher risk by lenders. There are three great ways to increase your available credit:

  1. Pay down balances on business cards and personal credit cards
  2. Request increases on business credit cardlimits
  3. Apply for a business line of credit

Establish company credit

Many wholesale suppliers and vendors will extend company credit accounts to their customers and report payment activity to the three major credit bureaus. Check with the suppliers you are already using to see if they offer company credit. If they do, consider opening a credit line and paying the balance off in full every month.

What kind of business credit is needed for a small business loan?

While having a good business credit score can increase the approval odds for a business to secure a loan, there are financing options available for all business credit ratings. Knowing which loan programs will accept your current credit score, will save you time and energy when shopping for the right loan for your business needs.

Loans for businesses with good credit

Businesses with excellent credit scores have more options when it comes to business financing options. Traditional bank loans typically require good credit, so business owners with good credit can shop for the best rates from traditional lenders or online lenders. Some types of loans that work best for businesses with good credit scores include:

  • SBA Loans – Backed by the S. Small Business Administration, SBA loans offer lower interest rates and smaller down payments than other financing options. The eligibility requirements for SBA loans can be strict and typically require a good credit score and at least two years in business.
  • Unsecured term loans – Term loans are a traditional type of business financing where the borrower receives a lump sum of money upfront and repays the debt with monthly payments of interest and principal. Unsecured term loans don’t require the borrower to pledge any collateral.

Loans for businesses with bad credit

Some small business lenders, like Biz2Credit, specialize in working with all types of business credit situations. To get a loan with a bad credit score, consider working with an alternative lender and be prepared to provide additional information during the application process, like a business plan and personal credit report. The following types of financing can work for businesses with bad credit:

  • Merchant cash advance – A merchant cash advance (MCA) is a type of business financing where the borrower receives a cash advance and repays the funds using future credit card and debit card sales. Since future sales act as collateral on the loan, MCAs are a great option for building better credit history.
  • Secured short-term loan – Term loans can be unsecured or secured, where they require some type of collateral. The collateral can be a business asset, like real estate or equipment, or a personal asset, like a home or investment account. Secured loans reduce the risk to the lender since they can seize the asset in the event of default, so they are a great option for borrowers with bad credit.

Bottom Line

Business credit is a summary of the financial health of an organization and appears on credit reports generated by business credit bureaus. The credit score is determined by evaluating several characteristics of a business including payment history, available credit, and time in business. Small business owners should monitor their score and take steps to improve creditworthiness when necessary.

Small business loans from Biz2Credit are a great financing tool for businesses and are open to a wide array of borrowers. If you’re not sure if Biz2Credit is right for you, check out Bilal Bhatti’s story about how Biz2Credit arranged financing for his fast food business.

Learn about the Biz2Credit financing process

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