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What is Business Credit? How Does It Work?

By The 100 Percent Financed Team on August, 6 2019
The 100 Percent Financed Team

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Isn't it surprising that 42% of business owners don't know they have a business credit score? Leave alone the meaning itself. They don't even know how to interpret their score. To explain this concept, we have to begin from a common ground.

Credit is the ability to borrow money. Therefore, business credit is the eligibility for your business to receive funds that you will pay later. In technical terms, it is the record of your business' financial performance that lenders use to ascertain if your business is eligible to receive returnable funds.

Is Business Credit important to your business?

Oh yeah!

If you want your business to go far, you can go alone. However, if you want it to go further and become a multinational company, there is no pain in looking for business credit whenever the need arises.

Not only this, but before an investor or financial institution gives you a loan, they want to know your business credit worthiness or score. If you have a better-established business credit score, you have a high chance of getting a more significant amount.

Also, for real estate entrepreneurs, using business credit for your soft costs is a great way move through the investing process smoothly or even using it for your "OOPS Fund,"  those unexpected maintenance repairs that come unexpectedly. 


Business Credit versus Personal Credit

Where is the line drawn between these two? Some business owners don't separate the two; hence, when an issue arises, both come to a halt. The golden point is keeping things separate. It doesn't matter the size of the business or your financial ability.

Sometimes it becomes harder to get a loan as a start-up venture. You have no choice rather than presenting your social security number. In short, financial institutions use your credit to know your creditworthiness.

In the future, this will be a problem as you will not get money for personal stuff like when you are applying for a mortgage.

How does business credit Work?

There are numerous agencies out there that offer loans. For instance, let's take an example of Experian and Equifax. They don't have a set of standard methods to calculate your credit score.

Experian uses a statistically based credit score calculator that takes different factors into account to see how much you can get. It's known as intelliScore plus. It uses factors like the number of years you've been in the business and your payment history.

On the other hand, Equifax goes on the "negative" side. It tries to compile the factors that may lead to the downfall of your business. This is a little scary, right? Who would want to lend your money using the chances of your business falling?

Don't worry, though. The method works perfectly, and only a few businesses meet their demise if they don't use the funds lent in the right way. Some factors they'll put in place include; chances of your business becoming very delinquent and the likelihood of your business closing.

Now, the genesis of a good credit score comes by building it over time. It involves practices like paying your previous business loans on time, being legitimate by making a business credit profile, and providing information to the credit bureaus.

Importance of Business Credit

Better Financing

When you have secure business credit, you pay less when you take a loan. If your lender sees your potential in paying (the information is retrieved from your previous transactions), he/she gives you more money at a lower rate.

More Sales

Customers will not come to a seller that does not deliver orders. Your business credit profile is there for everyone to see. Potential buyers will only contact sellers that have robust business credit.




With business credit, you can be assured of the constant flow of money in your business all year round. You don't have to wait to get your revenue. Don't lose hope since you are just starting. The companies that are eligible for thousands if not millions of dollars started somewhere. You also have to start climbing the ladder.


If you are interested in learning more on how you can receive business credit and the best practices on using it when investing in multifamily real estate than

click the link below for a free consultation.


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