Business funding is essential for any entrepreneur who wants to expand their company without giving up their equity. For this to happen, you must have a solid credit score, as it makes lenders more comfortable with your potential financial habits. They are therefore more likely to approve funding that will help you expand your business effectively. 

Do you feel like you need advanced certification to figure out how to better your business' credit score? The good news is that you don't! 

There are several elements that lenders use as deciding factors on whether you'll get a loan. Each scoring model may vary, but here are some of the most common factors that will determine your business' credit score. 

1. Payment History

Payment history is the most important component of your credit score. Even a single late payment, judgment, and collection is enough to dent your reputation with lenders and your ability to get loans. This is because they want to know that you will pay your debt on time before they consider you for another loan. It is recommended to pay all your invoices, business bills, and loans early. Paying on time can get you a favorable credit score, but paying very early can make it even better. 

2. Age of Credit History

How long you've held your business credit accounts is another crucial element that creditors look at before they can decide whether or not to loan you money. This age period includes the age of your oldest credit account, the newest one, and the average age of all your accounts. The average age, especially, will have a major impact on the credit score. The longer your credit history, the higher your credit score. 

3. Debt and Debt Usage

Your business's credit usage, as represented by your credit utilization ratio, is also something that will directly affect your credit score. Credit utilization is the ratio between the total amount you owe and the total of all your credit limits. It gives lenders a picture of how much of your available credit you're using so they know how reliant you can be on non-cash funds.

4. Industry Risk 

Lenders, like potential investors, want to know that your industry is safe and that the funds they loan go to good use. This is why your business must have the right SIC and NAICS codes, as they reflect the credibility of the industry or sector that you work in. 

5. Business Size

Most lenders prefer not to loan money to sole proprietors, and they always want to make sure that you're an actual business. The number of employees, period in business, and correct ownership information can either help or hurt you as you try to gain loan approval. Established businesses have a better chance of receiving credit as they have the relevant experience and a wealthy mix of credit accounts. This is why you have to ensure that your business is well-established before you apply for business loans. 

All these factors are crucial for your business if you want to boost your credit score to help you get approved for a loan. However, your payment history is by far the most crucial factor that most lenders look at. In fact, some of them base your credit score solely on the payment history.