Most small businesses do not have a credit rating. Here’s how to get one for free

Most small businesses do not have a credit rating.  Here’s how to get one for free

What is a business credit score? Tech startup Tillful is an alternative credit scoring system that provides free business credit scores. I spoke with Ken So, Tillful’s founder, to find out what this could mean for small businesses.

A business credit score is similar to a personal credit score. It is essentially a grade based on your business’s past experience with credit. Most business credit scores range from 0 to 100. Better credit is represented by higher numbers. Its algorithms identify patterns in your cash flow data, payment history, whether your income is diversified, your debt utilization, your overdrafts, and other data points.

Tillful’s business credit score uses similar information. But because you also connect up business bank and credit accounts, Tillful can generate a score when other agencies cannot. Plus, your score is based on real-time data. Why do I need a business credit score?

Payment history and amount of debtIndustry classificationPublic documentsLegal filingsCompany size and background informationHow the company compares to others in the same industry The main traditional business credit score providers are Dun & Bradstreet, Experian, and Equifax. These agencies look at:

“My dad struggled to get the capital he needed,” says So. “He ran his business with earned income. He was not able to scale the business to its full potential.” Without a business credit score, many companies simply don’t apply for credit even when they need it. They are limited to what they can accomplish with the cash they can access. So says getting a score gives them the confidence to apply for financing and make plans to grow their business.

Why doesn’t every business have a credit score? You can finance your business with a personal loan, but this has drawbacks. A personal loan will negatively affect your debt-to-income ratio which could make it harder to achieve other financial goals. A higher credit score might help you get better credit terms and lower business insurance premiums. With a low score, you might need to secure the loan with collateral or a personal guarantee.

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