When you quote a customer for a big order, you probably have a checklist of questions you like to ask:
- What’s their budget?
- Do they have a clear picture of what they want?
- Are their expectations realistic?
The companies you do business with probably also have a way to screen businesses they work with. They may look at your experience and reputation, your capabilities, and if credit of any kind is involved, they probably check your business credit.
Business credit is often a mystery for business owners—most have not checked their business credit reports—so they are often surprised by who can check their business credit reports and scores.
Business credit is largely unregulated, and anyone can check business credit, as long as they are willing to pay for it.
Understanding who’s looking at your business credit, and why, can help you make smarter financial decisions and set your bakery business up for success.
Equipment Financing Companies and Lenders
Whether you’re purchasing a new commercial oven, upgrading refrigeration, or expanding your kitchen space, equipment financing companies may review your business credit before approving loans or leases.
A strong credit profile can mean lower rates, better repayment terms, and access to more financing. And that can be the difference between affording top-tier equipment now or postponing essential upgrades.
Ingredient and Supply Vendors
Your bakery relies on a steady supply of ingredients, packaging and cleaning supplies. Suppliers who offer trade credit (such as net-30 or net-45 payment terms), often check business credit before extending payment terms.
Good credit can help you secure bulk orders without having to pay in full up front, allowing you to manage cash flow more effectively. Strong relationships with suppliers can also lead to better pricing and priority service, which is crucial during busy seasons.
And an added plus is that working with vendors who report payments to business credit bureaus can help you build or boost your credit rating if you pay on time. And that credit rating can then help you get better payment terms with your suppliers.
Small Business Lenders
If you're looking for financing to expand your bakery, cover operational costs, or invest in new equipment, small business lenders, including those offering SBA loans, may review your business credit before approving your application.
A few popular SBA loan programs require the lender to check a credit score called the FICO SBSS score, which can combine business and personal credit data into a single score.
A strong credit profile can help you qualify for better interest rates, higher loan amounts, and more flexible repayment options. If your business credit is weak or nonexistent, it may be harder to get your loan approved, or you may have to provide a personal guarantee. Making sure your business credit is in good shape before applying for a loan may help you get the funding you need.
Commercial Landlords
If you’re renting space for your bakery, your landlord may check your business credit before approving a lease or renewal. They want to ensure you have a track record of financial stability and timely payments.
A strong credit profile may help you negotiate better lease terms, lower deposits, or even secure a location in a high-traffic area that could drive more customers to your bakery.
Insurance Companies
Insurance is a necessity for bakeries, covering everything from equipment to liability risks. Many insurers assess business credit when determining whether to extend insurance, and what rates to charge.
A positive credit history may help your business qualify for lower premiums, reducing your overall operating costs. While every business wants to save money on insurance, these discounts can be especially important if your bakery has multiple locations or delivery services, where insurance costs can add up quickly.
Food Service Distributors
If your bakery sells wholesale to cafes, restaurants, or grocery stores, food service distributors will likely evaluate your business credit before setting up accounts. Your creditworthiness affects your ability to get favorable payment terms and delivery schedules.
Distributors often prioritize businesses with good credit histories. After all, they want to help ensure they get the products they need when they need them.
Business Partners and Franchisors
Thinking about expanding your bakery through franchising or partnerships? Potential business partners and franchise organizations will often examine your business credit history as part of their due diligence.
A strong credit profile demonstrates financial responsibility, making your bakery a more attractive investment. It can also lead to better contract terms and easier access to growth opportunities.
Managing Your Bakery’s Business Credit
Building credit takes some work, though it doesn’t have to be overwhelming. Here are some key steps:
- Monitor your credit reports: Regularly check your business credit to ensure they are correct and to understand how others may view your credit.
- Pay bills on time: Late payments to suppliers or lenders can negatively impact your score.
- Manage credit utilization: High balances can be considered an indicator of risk so keep your credit balances manageable, especially during peak seasons.
- Build relationships with vendors that report: Work with suppliers and lenders that report payments to credit bureaus to establish a strong credit history if you pay those invoices on time.
Unique Credit Considerations for Bakeries
Bakeries face seasonal sales fluctuations, perishable inventory challenges, and high equipment costs. These factors can influence how lenders and vendors interpret your credit history.
In fact, some business credit scores compare credit with other businesses in your industry. Being aware of these challenges can help you plan ahead. Should you experience a cash crunch, communicate with your creditors early and often.
You Can Check Credit Too
You can check business credit too when choosing vendors, business partners, or when deciding whether to take on a new corporate or wholesale client.
If you see warning signs on their credit reports like late payments or collection accounts, you may decide to get full payment upfront or avoid doing business with them. It’s better to know about potential issues before you’ve spent time or money on orders you’ll have trouble getting paid for.
The Bottom Line
Your bakery’s business credit is one ingredient for building a financially healthy company. You may not always know when someone will check your business credit, so be proactive and make sure that when they do, your credit profile is an asset that helps you grow.
About the Author
Source: Gerri DetweilerGerri Detweiler has several decades of experience guiding individuals through the confusing world of credit, and has earned a reputation as a reliable and independent source on personal and small business credit. Today, Gerri serves as Education Consultant for Nav, a financial health platform for small businesses owners to build and manage their business and personal credit, track cash flow patterns, and understand their financing options before they apply.
