How is a business credit rating determined?

A companies credit rating is based on multiple factors gathered to determine the financial risk involved with dealing with such a company. It basically tells you if you were to lend them money in the form of a loan, bonds or stocks, how well are they going to repay you in the future. The credit agencies gather information on the companies it had to deal with in the past such as suppliers and other lenders to form a rating in the form of letters like AAA, BB+ etc. Triple A being the highest rating one can get. Other factors include lawsuits filed against the company, negative judgements, corporate finance reports and the likes.

The main factor used to determine such a score is how fast a company repays its debts. Those could be loans, suppliers accounts, running bills, utility bills etc. Does it pay on time or fail on occasions to meet the deadlines? The structure of the companies debt is also took into consideration, does the company have most of it's debts under low interest on the long term or high interest and short repayment schedules? What is the ratio of debt to assets? One of the most important factors is the companies cash flow, does it get enough available money to reinvest in the companies operations or does it have to use it to repay bills and salaries?

One aspect that is also considered is the business profile of the company. If you'd like to find out a business credit rating, you can do so quite easily, read more. They will factor in the reputation, size, history and also the company stock and board of directors. By taking all these factors into consideration you can tell by the rating the size and depth of the company as a whole. Using all these factors, they have created mathematical formulas that pull up a credit rating like stated above and you can use it to determine if you'd like to do business with them or not.

Having a good credit rating is vital to any business if it ever wants to expand and flourish. It will be needed to get funding in order to purchase new assets, equipment and a qualified workforce. It can help in order to maintain its levels of liquidities for day to day operations. It can also provide substantial benefits if the company is looking to partner with another business, to attract new investors, to sell the business or even just increase its inventory. 

One important thing to do for small business owners is to separate their personal credit from the companies credit by applying for a LLC business structure or by incorporating it. This way if anything happens in your personal life, it won't affect the company in any way so that you can continue your operations. Also, make sure your company has all the necessary licenses and is registered with the major reporting agencies like D&B and Experian. Its also important to deal for the most part with companies that also report to major agencies on a regular basis to keep your name up.