Just like an individual has a personal credit score, a company has a business credit score. Understanding your personal credit score is relatively simple. The strength of your personal credit score is based on payment history, current level of debt, types of credit accounts available, length of credit history, and number of recent credit applications. Similarly, businesses with access to credit are assigned a business credit score. A business credit score is determined based on credit history, public records and demographic information. While personal and business credit scores are taken into consideration in the loan qualification process, it is crucial to acknowledge that both of these metrics are indicative of historical credit behavior. Neither of these metrics takes into consideration specific aspects of your business that drive or mitigate risk in the FUTURE. This is where we draw a line between understanding your business credit SCORE and your business credit PROFILE.
Analyzing your business credit profile takes into account current and future inherent risks of your business. At Camino Financial, we qualify business risk in four categories: Financial Strength, Debt Capacity, Business Attributes and Credit History. Camino Financial qualifies risks by examining different category inputs. For instance, as a measure of Business Attributes, we evaluate how much a company’s top 3 customers generate in sales to see if there is heavy customer concentration. If top customers generate over 50% of sales, we highlight the possibility that losing a top customer may create high financial distress for the business. Further, we suggest the business take action to diversity its sales stream across other new customers. For more examples, see our credit assessment pyramid (image featured).
Once a small business owner has flagged potential risks in its business, then the business owner is equipped to make smarter financing and strategic decisions. Overtime, a small business owner can take measures to lessen areas of operational risk, thus creating opportunities to access cheaper capital. At Camino Financial, we provide a FREE credit assessment report to small business owners to get businesses on the right path to affordable capital. Click Apply to review our assessment options that suit your immediate and long-term business needs.