Does Your Company Have a Healthy Business Credit Score?
Just like in your personal life as you seek loans, credit scores are critical in the business world as well. As you get your small business off the ground, or as you seek to expand your operations by purchasing more office space or by hiring additional employees, you’ll need working capital and better cash flow. You’ll likely need a small business loan or other types of funding to achieve these goals. However, if you have poor business credit, you may have a difficult time finding a lender willing to approve your loan. It’s crucial for you to evaluate your credit score and determine ways you can improve it.
Why it’s Important
If a person goes to a financial institution looking to purchase a home, a car or another significant item, the bank or credit union will look heavily at this person’s credit score to determine whether he or she will be likely to repay the loan. The same thing will happen when your business needs funding. The lender needs to know he or she will recoup the investment of lending your business money. Business credit is a reflection of your history with other loans and financial obligations. If you have a poor score, it tells the lender you’re a risky investment because you will likely struggle to make your monthly payments. Your business may not even be around before you pay off the loan. Lenders need to know you’re a safe and trustworthy borrower.
How to Improve Your Score
If your current business score isn’t what you’d like it to be, don’t give up hope that you can obtain future financing. While you may be struggling with business credit today, you can start right away to change that. First, be cautious about opening multiple lines of credit or having more than one business credit card. Having several outstanding loans or high amounts of debt is a sure way to put a damper in your score. Don’t borrow more money unless it’s the best possible option. Also, make sure you make your monthly payments on time. If you’re struggling in this area, communicate with your lender.
What it Will do for You
If your business has healthy credit, you open up many options now and in the future. Not only will lenders feel more comfortable about loaning you money, but you can also secure lower interest rates and more favorable terms than if you had a low score.
If you realize your business credit isn’t where it needs to be, make changes today. This will bring peace of mind to you and to the organization you’re building.