October is Small Business Month in New South Wales, and OnDeck is getting involved by encouraging small businesses around Australia to get to know their credit score.
Most Australians are aware that they have a personal credit score maintained by various credit reference companies. What’s less well known is that businesses have their own credit score – one that’s entirely separate from the owner of the enterprise.
In fact, research a few years ago by OnDeck found more than half (53%) the nation’s small business owners were unaware that a credit scoring system applies to their venture. Awareness has increased in recent years, but many operators are still in the dark about this crucial piece of data on their business.
Why does it matter? Because whenever you apply for business finance, the lender will use data like your business credit score – and it can shape whether your application is approved, and the potential interest rate you will pay.
Charlene Batson, COO of OnDeck Australia, explains, “A business credit score works in much the same way as a personal credit score, helping lenders assess the enterprise’s creditworthiness and the level of risk it poses to a lender.”
Ms Batson adds that it is important for small business owners to get to know the credit score of their enterprise, and make a habit of checking it regularly.
“Even if you are not in the market for business funding, your business credit score can provide you with a sense of the financial position of your business,” says Ms Batson.
How to check your business credit score
The good news is that taking a look at your business credit score is easy.
OnDeck invites small business owners and brokers to take advantage of our Know Your Score online tool. It’s absolutely free, secure and immediate, with the credit score generated by Equifax.
Simply provide your company details including the ABN, and your business credit score – a value between 0-1200,will be provided on the spot. The higher the score, the better.
Even better, you can check your business credit score without leaving a footprint.
“Typically in Australia, your credit score is negatively impacted each time you check it through a lender or bank,” explains Ms Batson. “That’s the beauty of Ondeck’s Know Your Score tool. You can review your score and establish the health of your business without the risk of lowering your business credit score.”
One third of businesses that used Know Your Score have an “Excellent” rating, with 769 as the average score. *
3 ways to build a healthy business credit score
Establishing and maintaining a healthy business credit score is not hard. The following three steps can help you boost your venture’s score;
- Make sure your profile is accurate– check your score regularly looking for any unexpected downward movements. Credit reference firms offer dispute resolution processes if you believe any details in your business’s credit record are incorrect.
- Establish and stick to agreed credit terms– it makes sense to leverage 30- or 60-day payment terms with suppliers, but be sure to stick to the agreed upon terms.
- Use credit to build your score– avoiding credit altogether makes it harder for lenders to assess your creditworthiness, and without information on which to establish a score, avoiding credit can negatively impact your score.
*This data is based on business credit scores provided by OnDeck Australia to Australian SME’s since September 2016.
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* The timeframe required to process and fund loan applications may vary for each individual application. Factors such as the completeness and accuracy of application materials, verification processes, and external circumstances can influence the processing & funding timelines.