What is a Business Credit Report? And other top questions for SMB owners

Highlights: 

• A business credit report is a financial snapshot of a business. 
• An Equifax Business Credit Report is a comprehensive report on a business’ credit history with detailed information that lenders, creditors, and business partners use to make decisions about a business. 

Running your business is hard work but understanding your credit doesn’t have to be. Understanding how your Equifax Business Credit Report and Equifax credit score work gives you the necessary information to make smarter decisions. Below, we answer the top questions that small and medium-sized business (SMB) owners in Canada are asking.

 

What is a business credit report?

A business credit report is a financial snapshot of a business. Lenders, service providers, and partners use business credit reports to assess a company’s financial risk and creditworthiness. It is similar to an individual’s credit report, containing a history of payments and financial information from various sources which can help determine if a business is a good financial prospect.

 

How are business credit reports different from consumer credit reports?

A consumer credit report is an individual’s credit history that focuses on individual financial behaviours. Many lenders use consumer credit reports as part of their decision-making process to choose whether to extend credit, and at what interest rate, when a consumer applies for a credit card, finances a vehicle, or purchases a home. Business credit reports follow the same principles. Your business’s credit history is used by lenders, suppliers, and potential partners to assess the company’s financial health and determine if your business is a favourable customer or a financial risk. The payment history of a business is reported from:

• Financial institutions (business loans)
• Vendors and suppliers (trade credit)
• Collection agencies
• Courts 
• The Superintendent of Bankruptcy (any legal filings like liens or bankruptcies)

 

What is a business credit score? Why is it important?

Similar to a personal credit score on an individual consumer, a business credit score is a numerical rating that measures the creditworthiness of a business. It’s used to help predict the health of a business and determine if the business is likely to fail or become delinquent over the next 12 months.

A high business credit score can help your business:

• Secure financing with more favourable terms and lower interest rates

• Negotiate better payment terms with vendors and suppliers

• Attract new business partners who want to ensure your company is financially stable

It’s important to note that your business credit report consists of multiple business credit scores, which focus on different credit aspects. The Equifax Business Credit Report features the following business credit scores: Commercial Credit Delinquency Score, Financial Trade Delinquency Score, Business Failure Risk Score.

What is an Equifax Business Credit Report, and why do I need one? 

An Equifax Business Credit Report is a comprehensive report on your company’s credit history as compiled by Equifax. The Equifax Business Credit Report is one of the primary reports used in the business world to evaluate a company’s financial risk, making it an important consideration for securing loans, lines of credit, and favorable terms from suppliers. It also aids in risk management decisions when vetting new potential partners and suppliers. 

 

What information will I find in an Equifax Business Credit Report?

The Equifax Business Credit Report contains several sections that help provide a full picture of your company’s financial standing. It includes data from banks, credit unions, auto financers, collection agencies, courts, and the Office of the Superintendent of Bankruptcy.

• Business Identifying Information: This includes the company name, address, phone number, and certain information on the business owner(s)
• Risk Scores and Ratings: This section provides various business credit scores that help predict the likelihood of your business becoming severely delinquent or failing within the next year. These can include a Commercial Delinquency Score and a Business Failure Risk Score. It also includes the Payment Index, which shows how timely you pay your creditors, and the Credit Index, which measures overall business risk when selling to a customer.
• Credit Summary and Payment History: This section offers a summary of your credit accounts, such as loans, lines of credit, and supplier accounts. It details your payment history, current balances, and any past-due amounts.
• Public Records: This section lists any legal filings against the business, such as liens, judgments, and bankruptcies.

You can learn more about the Equifax Business Credit Report and view a sample report here 

 

Where does the data in an Equifax Business Credit Report come from?

The data comes together from a variety of sources to help build a comprehensive file on a business. The data may be gathered from:

• Financial Institutions: Banks, credit unions, auto financing companies, and other lenders who report on business loans, lines of credit, and credit cards
• Trade Credit: Industry credit groups, and suppliers and vendors who report on payment histories and whether the company is paying on time
• Public Records: The Office of the Superintendent of Bankruptcy, and other government and court filings, including liens, and judgments
• Business Information: Public sources and corporate registration databases,  to confirm company information like addresses, phone numbers, and legal status

 

Take control of your business: Order your Equifax Business Credit Report today to make more informed credit choices.

Want to see what the Equifax Business Credit Report looks like? View a sample report. 

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