As a business owner, you’re probably aware that your business credit score is one of the most important factors when it comes to getting capital to support or grow your business. Having a low business credit rating will impact whether the loan lenders will agree to work with you, and can directly influence your business’ ability to expand its’ operations. So to help you out, here are 3 credit secrets to setting your business up for financial success;
1. MAKE TIMELY PAYMENTS
In order to establish a good business credit, you need to pay your credit card bills and business loans on time. Making timely payments on the existing business debt will help you build trust with future lenders, and will help raise your business credit rating. In addition to that, it’ll help you avoid the unnecessary late charges and compounding interest.
That said, if you are having financial problems and you think you might not be able to make the payments on time, consider talking to the lenders and asking them to restructure or alter your payment options. Many lenders will try to restructure your payments because they know that they are likely to receive little or even nothing if your business enters bankruptcy. Talk with higher level managers when you are negotiating a large debt, and do not hesitate to offer any creative solutions you might have.
2. CHECK YOUR BUSINESS CREDIT REPORT AND ASK YOUR LENDERS TO REPORT BUSINESS CREDIT HISTORY
It is important to regularly check your business credit report so as to correct errors, inaccuracies and out of date information which can lead to the downfall of your business credit score. Also, remember to contact your lenders and ask them to report all account closures to the credit rating agencies. The more lenders report a positive business credit history to the credit rating agencies, the higher your business credit score will be. Lenders aren’t required to do this, so it’s always a good idea to check with them and make sure that these positive credit actions are reported to help improve your business credit reputation.
3. BORROW WISELY AND LIMIT YOUR CREDIT USAGE
Borrowing money is not necessarily a bad thing; the problem only comes in when you borrow more than you are able to pay in a timely manner. Therefore, it is important to only take on a debt that you are sure your business will be able to handle. In addition to that, you need to limit your credit usage. If you borrow and spend too much it might suggest that your business is in financial trouble, and it can hurt your credit score. High debt level means that your business will have little wiggle room in case the profits decline, and there is no lender who wants to see this. Consider keeping the total debt level at 30% of your credit limit.
Having healthy business credit matters because it means that your business is likely to obtain larger business loans in the future, and will also stand a chance of getting more favorable lending terms. By using the above secrets, you can build and improve your business credit rating, and set up your business for financial success.