Why It's a Bad Idea to Mingle Small-Business and Personal Banking

The Secret Credit Score Every Business Owner Should Know About, and How to Build Yours

Most business owners understand the importance of having a good personal credit score when it comes to obtaining financing for their business. But that’s not the only score that business owners need to worry about. What’s equally important (if not more so) for business owners is their business credit score. However, according to Creditera, a whopping 60 percent of small and midsized business owners don’t know their business credit scores and 50 percent didn’t even know that they had a business credit score.

Related: 8 Ways to Build Your Company's Credit

A company’s business credit score plays a crucial role for others to determine the approval of various lines of business credit. Therefore, it is vital for business owners to understand what a business credit score is, how it’s calculated, how their personal credit can affect it and what steps they can take to build and/or improve their score.

What is a business credit score?

A business credit score is a reflection of a company's creditworthiness and ranges from 0 to 300. According to Creditera CEO Levi King, your business credit score is important for five main reasons:

1. It impacts your ability to get approved for business financing as well as obtain favorable interest rates, particularly from a traditional bank or credit union.
2. Commercial partners, like suppliers and vendors, use it to determine extensions of trade credit. If your business credit score is low, you might not be able to get the inventory you need for your business.
3. Insurance companies use business credit to determine insurance rates for your business.
4. Large corporations and government contracts have minimum business credit score requirements you must meet before doing business with them.
5. A strong business credit score protects your personal credit by allowing you to rely on your business assets to carry the load of financing the business. This eliminates the risk of using your personal credit on business and growth opportunities, giving your business access to around 10 to 100 times more credit than you would be able to obtain as a consumer.

Read full article here: http://www.entrepreneur.com/article/249668