Why is Business Credit Important When it Comes Time to Sell?

Did you know a low business or personal credit score could harm your sale? Keep reading to learn why a business credit score is important and how it can impact the outcome of your transaction and the future of your business.

4 Reasons Business Credit Score is Important In a Sale

It’s a common misconception that your business credit history is only relevant when applying for a new business loan or credit line. As a small business owner considering selling your company, it’s essential to ensure that your business credit is in good condition for the following reasons.

1. Attractiveness

Attracting potential buyers is more than just showcasing your products or services. It’s also about showcasing the overall health of your business. A good business credit profile can enhance your business’s attractiveness by showing buyers that it’s well-managed and financially sound. Additionally, depending on the structure of your sale, the business credit profile you have created will likely be transferred to the new owner. Understandably, no potential buyer will want to take on large amounts of debt or bad credit.

2. Business Financing

When trying to secure financing such as business loans, lines of credit, or business credit cards, your business’s credit history can significantly impact the interest rates and terms potential buyers will be offered. If your company has a weak credit score, it will be more difficult for buyers to get the money they need, which may result in less money for you as the seller.

3. Negotiation Power

During a sale, negotiation power is crucial, and business credit plays a significant role in determining whether you have leverage. A higher credit score can improve your negotiation power, enabling you to secure better terms, payment schedules, and other benefits. Conversely, a poor credit score can reduce your leverage, making negotiating harder.

4. Protection

Every business owner must clearly distinguish between personal and business finances. This practice is not just a formality but a fundamental requirement for maintaining financial clarity and protecting your personal credit score. It becomes even more critical when it comes time to sell your business, as it creates a shield that protects your personal credit score from any financial or credit issues associated with the business and its sale.

How to Maximize Your Chances of a Successful Sale

Are you ready to list your business for sale? Sunbelt has a team of brokers ready to help you leverage your credit score for the better and achieve favorable transaction results. Whether you’re selling a middle market company or a main street business, our network of brokers is one of the largest in the world and has all the experience required to help you reach success. Find a location near you to get in touch with a local broker.