Are you familiar with these business credit terms?

April 22, 2019
Carly, Cash Manager, Education, Financial Health

The U.S. Small Business Administration is a font of information for all SMB’s. At Expex, we receive many inquiries from SMB owners inquiring about automation for bill pay and cash flow management. Often, they are new business owners or start ups understandably deficient in their knowledge of financial terms.

Marco Carbajo, is a frequent guest blogger on the site, www.sba.gov. On April 18^th, he penned an information article, Top 10 Business Credit Terms Small Business Owners Should Know. Here is an excerpt from Mr. Carbajo’ s article:

As a small business owner, it is important to have an understanding of business credit terms. Similar to personal credit, business credit determines whether your company can be trusted by the way it manages money. Like personal credit, business credit is a reflection of how well your company manages money.

Why is business credit important?

The Nav American Dream Gap Survey, 2015 revealed of small business owners surveyed, 45% did not know they have a business credit score, 72% did not know where to find information on their business credit score and 82% didn’t know how to interpret their score.

The good news is that you don’t have to be a financial expert to negotiate the world of business credit. By knowing some key terms and definitions surrounding business credit, you can earn lenders’ trust and make your way to successful funding.

Here are the top ten business credit terms you should know:

Accounts Receivable– Also known as A/R, accounts receivable refers to the money owed to your business by others for products or services provided.
Business Credit Report– A business credit report is a detailed report of a company’s credit history prepared by a business credit reporting agency. The information contained in a business credit report provides crucial details needed to make informed credit decisions.

The data in a small business credit report is vital to getting the funding you need to successfully run and grow a business.

Business Credit Score– While a personal credit score is a number that represents an individuals credit history; a business credit score represents the credit risk of a business itself. Each business credit reporting agency has a different type of scoring model with scores ranging from 1-100.
Cash Flow– This is the cash that flows in and out of your business in a month. The cash coming into the business can come from customers & clients. Cash going out can be from expenses such as rent, payroll, taxes, etc.