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How To Increase Your Business Credit Score
Establishing your business takes a lot of consideration before you leap into the entrepreneurial world. Be it setting up your unique brand, finding your niche in the very vast and broad market, or asking yourself if you are financially capable of starting an enterprise of your own.
One of the things most budding entrepreneurs seem to miss is checking if their credit score is doing fine. A starting business needs to have good business credit. It is quite shocking to know that not many business owners grasp the importance of maintaining a good business credit score and utilising it as a financial asset.
What is business credit?
Business credit is a company’s ability to borrow from an investor or lender for business purposes. Think of it as your business’s financial portfolio - it gives people a picture of how you manage your finances as an enterprise. It also allows you to reach out to more creditors and have more funding to jumpstart your business.
To know more information about the basics of business credit and what loan options are available for your venture based on your credit score, services like Crediful.com may be the best place to start.
How do I improve my business credit?
Now, to get right into the dirty work, you might then ask, “How do I improve my business credit score?” Although it might seem like a daunting and overwhelming concept, here are some tips and tricks for you to establish a good business credit:
Pay bills promptly
More often than not, you need to admit that spending and paying bills usually take up most of the financial responsibilities people need to keep up with at all times. Paying bills late gives you a bad rep as a business, and it might significantly hurt your credit score.
Much like establishing a good personal credit score, it would help to be more prudent and mindful of keeping track of your bills and settling your payables on time. This way, creditors would be more inclined to lend you a helping hand and extend loans that can help you in times of financial distress.
Keep your debts at a minimum
Now that you have started to increase your business credit score, you might be tempted to reach out to more lenders or creditors and ask for funding through loans. Especially if you have a lot of plans for improvement, e.g. renovation for your shop or office, buying more materials for production, hiring additional people, etc.
The problem with this is you fall into a debt trap, wherein as you rack up more loans, you might be chewing off more than you can swallow. As you incur more debt, your credit utilisation decreases, causing your business credit rating to drop.
Regularly check your business credit report
Being a business owner means that you have to put your complete devotion, 101% of your time and effort if you envision your venture to lift off. Part of this is regularly monitoring the gears and flow of your business, from manufacturing to marketing, then production.
This supervision should also be applied in following up with your business credit report. A monthly look-over would not even consume a big chunk of your time. This is so you would not overlook any deficiencies or inaccuracies or some debt payments you might have missed that might affect your business credit score.
Do not hesitate to use credit
Financial experts would most definitely advise that you use your credit. Opening a few credit accounts for contingency won’t even hurt, as long as you are cautious in not going over your set loan limit. It is also advised that using credit would further increase your business credit score.
Be in touch with your creditors
Maintaining a good relationship with your creditors or lenders would also be an excellent way to ensure that your business credit is in tiptop shape. Setting a payment plan with them would also mentally unburden you as a borrower trying to remember when to pay.
It would also be useful to have constant communication with your creditors, so inquiries and concerns regarding irregularities or mistakes in forms or data provided can be ironed out. This way, it can ease adverse outcomes, and you can altogether avoid misunderstanding between you and your lenders.
Avoid Risking your Credit Score by Abusing your Credit Power Lastly, it is essential to note that with a great credit score comes great responsibility. To have and maintain a good business credit score, you must also avoid risks that would endanger your credit score altogether.
This would mean being careful in engaging in financial activities that might hurt your business credit in the long run. This might be entertaining lenders who have questionable standing and methods when it comes to extending loans or even financial ventures that might put your business altogether at risk.
Now that you have your basic know-how on establishing a good business credit score using these tips would help in jumpstarting your business and lead you to responsible fiscal management for your enterprise.
Tell us your story
Are you looking to promote your business?
South African small business owners can create your free business listing on nichemarket. The more information you provide about your business, the easier it will be for your customers to find you online. Registering with nichemarket is easy; all you will need to do is head over to our sign up form and follow the instructions.
If you require a more detailed guide on how to create your profile or your listing, then we highly recommend you check out the following articles.
If you enjoyed this post and have a little extra time to dive deeper down the rabbit hole, why not check out the following posts on small business.
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