Building your companys credit history is important — now more than ever. Most firms seeking loans aren’t examined by Venture Capital investors with the time and resources to carefully examine balance sheets. Major banks now issue fewer small business loans than ever before. For these financial institutions, the cost of evaluating a company’s standing, on their own, has begun to outweigh potential benefits. This is where credit scores present a solution. Lenders turn to credit scoring companies to model the financial stability of those seeking credit. With this, lenders can use credit scores to quickly filter companies based on their credit worthiness.
While individuals may be familiar with consumer credit scores, business scores play by different rules. If your plan is to build your company’s credit score, it’s important to understand their nuances and how they differ from their consumer-counterparts.
First, you should register for a D-U-N-S number. Though there are several different business credit scoring models, the DB score is arguably the most important. In order to receive a DB score you must register your company with the government. Contact the US Small Business Administration and ask about getting a D-U-N-S number. This will act as a unique identifier for your company, like a social security number does for consumers. Vendors will lookup your companys D-U-N-S number from a database, in order to pull information on your company. The DB scores importance is chiefly due to the fact that it has been around the longest, and is therefore used by a large number of lenders.