How To Make Your Small Business More Credit Worthy
Have you dealt with businesses that are consistently late in paying their invoices or actually don’t pay their bills? Do you find yourself having a negative opinion of them and prefer not to do business with them? Even tell others about their lack of payment?
Credit worthiness is not only an indication of the financial health of a business, but it is also a direct measurement of its credibility and trustworthiness. Companies that fall short in this respect risk losing out on opportunities to attract new business since a poor credit report can discourage customers, prospective partners, and suppliers from transacting with you.
A good credit report not only reflects well on your business; it also makes it easier to secure funding when you are in need of it. Banks, financial institutions, and private lenders will always be more willing to lend money to a credit worthy business than to one with poor credit.
Make your business more credit worthy with these three practices:
1. Always stay on top of your credit reports
There are various credit reporting agencies like Dun and Bradstreet, Experian, and Veda that a prospective business partner or a significant customer may approach to check your credit report. Ensure your information on all the major credit reporting agencies is up to date. The report should reflect the actual status of your revenue, assets, business credit cards, business accounts, the past and current line of credit, collections, payment history and the like. If you find any incorrect information, contact the corresponding agency to get it corrected. Another way to keep your information up to date is by submitting audited financial statements to credit bureaus regularly.
2. Make payments on time
A good history of repaying creditors on time contributes to a good credit score. Whether it’s monthly credit card payments or paying back loans from banks and private lenders, be sure to make timely or even early payments, if possible. Establish a line of credit with vendors from whom you regularly purchase, instead of making on-the-spot payments. Timely payments of all your lines of credit can help you improve your credit score.
3. Keep your business and personal accounts separate
Do not mix your personal finances with that of your business. In cases of Small Businesses, many prospective partners and suppliers may want to check your personal credit report along with that of your business. Ensure both are up to date and have a healthy score. Limit spending on both your personal and business credit cards and try to keep it to 20-30% of your credit limit. Debts should always be kept in check as an increasing debt line can indicate a poor financial state of your business.
Credit reporting laws in Australia have been redefined as of March 2014 to give a more comprehensive picture of the financial health of a business. Being proactive in ensuring a good credit score can prove the creditworthiness of your business to potential lenders and partners, setting the stage for the continued growth of your business.
“The opinions expressed by Smallville Contributors are their own, not those of www.smallville.com.au"
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