Credit Questions – 5 Common Questions About Business Credit Answered

Credit Questions - 5 Common Questions About Business Credit Answered | Credit Questions – 5 Common Questions About Business Credit Answered | Business financing is something that many small-medium business owners struggle to wrap their heads around. For start-up founders and those who are in the early days of a new business, financing can seem particularly overwhelming. The good news is, with a bit of financial knowledge on hand and the help of reliable professionals, you can learn to navigate this territory with confidence. To help you get started, here are the answers to five of the most common questions about business credit.

1. What is trade finance? 

Also known as a trade loan, trade finance is a type of finance that assists SMEs in maintaining cash flow when expenses are high. This revolving line of credit can be used to: 

  • Maintain your inventory and stock levels 
  • Pay your domestic or overseas suppliers
  • Sell to overseas clients 

The credit is provided on an as-needed basis, allowing you to keep output high and cover costs later. By increasing your purchasing power, this type of funding gives you flexibility over your trade, no matter how complex your requirements may be.

2. What is asset finance?

Asset finance is a type of finance that businesses use to access equipment, vehicles, and any other assets needed to help with growth and expansion. This financing is suited to businesses that require the purchase of equipment or who have existing business assets to borrow against. It allows businesses the flexible working capital to expand and take on new opportunities while maintaining a steady cash flow.

3. What is a business credit score?

A business credit score is a number derived from your business credit profile. It is used to see how creditworthy a business is when applying for things like financing or becoming a B2B customer. It differs from a personal credit score as it is mainly based on commercial information, rather than personal information. It can be difficult to bounce back from a low credit score, so keeping an eye on your business credit report and remaining punctual with bills is always recommended. 

4. How do you establish good business credit?

Once you have established your business and set up your business banking accounts, building business credit isn’t particularly complicated. In fact, it can be as simple as practicing a few good habits. Always keep your company and director records up-to-date and be conscious of any information you have on the public record such as lawsuits, judgments, or overdue taxes. 

Your score is determined by your financial history, so make sure you’re using your business credit cards and accounts for their designated purposes. Prospective lenders are interested in your reliability to pay back loans, so avoid late payments and business defaults by paying your invoices as early as you can. 

5. How do I check my business credit score?

The most reliable way to see your business credit score is by checking directly with the three major credit reporting bureaus: Equifax, Dun & Broadsheet, or Experian. You can make an order to receive your credit report and score from any of their websites. Be mindful that this is likely to incur a cost, which may vary depending on which agency you choose. 

There also may be a slight variation in your credit file and scores from each bureau, so you may want to consider checking all three of them for accuracy. You may see offers to get your score fast and free from other websites. However, be sure to review their privacy policies before entering your personal information.

Now you have a bit more of an understanding of how business credit can be used to your advantage, how might it be applicable in your enterprise?