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Your Credit Score Can Impact Your Business

John McMalcolm

November 27, 2014

As a small business owner, it is important that you maintain a good credit score consistently.

A good credit score reflects your financial stability, and it can go a long way in helping you achieve your business goals.

Here is a look at how your credit score can impact your business….

Getting a Small Business Loan

Whether you are planning to start a small business or expand your existing business, you may have to obtain a loan to raise capital for your venture.

When you apply for a small business loan, you will be asked to submit a credit report.

If you have a good credit score, you will be regarded as a low-risk borrower by the lender, and therefore, you will have a higher chance of getting your loan approved.

On the other hand, if you have bad credit, your loan application will most likely be rejected.

Although it is possible to get a loan with bad credit, you have to be prepared to pay significantly higher loan rates.

Having a good credit score enables you to get all kinds of business loans more easily, including startup loans, equipment purchase loans and business expansion loans.

Obtaining a Surety Bond

Some states require people to obtain a surety bond when they are applying for a business license.

A surety bond serves as a guarantee that they will operate in compliance with state laws and regulations.

Applying for a surety bond is similar to applying for a business loan in that it involves the evaluation of your credit history as part of the approval process. If your credit score is high, it is much easier for you to obtain a surety bond.

You may still qualify for a surety bond if your credit score is low, but you may have to pay more.

According to an article entitled "The Important Connection between Your Credit Score and Surety Bond", surety bonds can cost up to 10 percent more for people with low credit scores.

Getting a Good Deal on Business Insurance

When you are purchasing insurance for your small business, your insurance provider will use your credit score to determine your insurance premium.

According to statistics, people who have good credit scores are less likely to file claims than those with bad credit, and they usually pay their premiums on time.

As such, you can expect to get a lower premium from your insurer if you have a good credit history.

Renting Business Premises

Nowadays, many landlords and property rental companies require businesses to meet a certain credit score requirement before they rent out their properties to them.

In most cases, the credit score requirement is 650. If your credit score is below 650, you may still be able to rent a property if you can get a co-signer or make certain concessions, such as paying a higher deposit or several months' rent in advance.

As you can see, having a good credit score can be beneficial to your small business in many ways.

As such, you should make a conscious effort to keep your credit score high.

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