Building financial credibility can be a ticket to growth and opportunity for small business managers and entrepreneurs. Enter the business credit score — a metric that, when high enough, can open doors to new opportunities. Whether you’re eyeing a new line of credit, negotiating better terms with suppliers, or keeping your business’s reputation solid, your business credit score is your financial report card.
What is a business credit score, and how does it affect your operations? Here’s a jargon-free breakdown.
Think of a business credit score as a shorthand assessment of your company’s financial trustworthiness. This number, which typically ranges from 0 to 100, tells lenders, suppliers, and insurers how likely your business is to pay its debts on time.
A higher score can be the golden ticket to lower interest rates, better vendor terms, and even reduced insurance premiums. A low score, on the other hand, can mean higher costs and fewer opportunities knocking on your door.
Just like your personal credit score, business credit scores are calculated using several factors, including:
Now, who keeps track of all this? Dun & Bradstreet, Experian, and Equifax are the companies behind credit score data. Each operates a bit differently:
Because these agencies have distinct methodologies, your score may vary depending on which one is used.
If you’ve ever struggled with high-interest loans or stiff payment terms, your credit score was likely the culprit. Here’s why it matters.
Here’s the good news: You’re not stuck with your current score. Like any grade, it can be improved. Use these strategies.
Don’t Let Stagnant Funds Drag You Down
Stagnant funds — or idle credit lines that remain untouched — can signal to lenders and credit agencies that your business isn’t actively growing or utilizing resources effectively. While maintaining low credit utilization is key to a good score, having unused credit that stays dormant for extended periods might suggest you aren’t building your credit history or managing cash flow actively.
How to Avoid This: Periodically use your credit lines for small, manageable expenses and pay them off promptly. This keeps your credit profile dynamic and demonstrates financial responsibility to lenders and reporting agencies.
Effective expense management is a key driver of a healthy business credit score. Here are some key benefits.
Timely Payments
With automated recurring payments and expense tracking, businesses can make sure suppliers are paid on time, which directly impacts their business credit score.
Improved Cash Flow
Detailed expense tracking prevents overspending, which helps ensure businesses have enough cash to cover financial obligations without resorting to excessive credit.
Error Detection
With enhanced visibility into expenses and real-time tracking and reporting, it’s easier to catch discrepancies or errors that could affect financial standing, like overcharges or duplicate invoices.
Enhanced Credibility
Organized expense management reflects positively on financial stability, potentially strengthening relationships with creditors and boosting the business’s reputation.
Managing your business credit score goes beyond avoiding late payments — it’s about adopting a holistic approach to financial health. Effective expense management paired with tools like Navan can streamline the process and provide real-time insights to track expenses and optimize budgets.
Your credit score signals financial potential. With modern tools and smart management, you can build vendor trust and drive business growth. Explore Navan today to start your journey.