How do I build a business credit profile?
Cash is king in business. Whether it’s servicing fixed costs or running new campaigns to attract new customers, everything has its price. If you have a vision for growth or you simply just want to make ends meet day-to-day, but you are not turning over enough to facilitate this for whatever reason, it’s increasingly important to source finance somewhere, somehow(1).
In this post, we’ll tell you how you can help to build a business credit profile – in turn, building your business credit score – which is what banks and other credit providers may use when making that critical judgment on your application for finance(2).
You’ve probably generated elaborate plans for what you’ll use this finance for. Perhaps revamping your offices with some new furniture or upgrading your storage facilities to hold more stock due to increases in your sales forecasts; however, you don’t have much of a credit profile so you aren’t really sure of whether or not you’ll be successful. Let’s take a few steps back and find the place to start.
There are a few questions to ask:
- Do you currently have/ use any form of credit at all, for example a small limit credit card? If you’re looking for a place to start, this is usually a great one. This isn’t your end goal here, it’s just a way of borrowing smaller amounts of cash at a time and proving that you can pay them back. Consider a range of different providers, if you don’t feel you’ll have much luck with the larger organisations, consider local providers instead. Do your research and get the best deal for you
- If you have credit, do you make use of it? Again, this is tied in with question one but if you do have access to credit, do you make use of this. Showing regular and responsible usage will be contributing towards and building that credit score which in time will enable you to borrow increasing amounts
- Are you relying on personal credit? If there isn’t enough information available on your business, lenders will look at your own personal credit rating. If you do rely on personal credit and it isn’t in order, this may have a negative effect on your application for business finance
- Do you file your accounts/ do you file them on time? Lenders might not lend money to businesses who are registered, but do not file their accounts. Late filing in itself is often assumed to be a sign of financial difficulty
- Do you pay your suppliers on time? Paying your suppliers on time isn’t just good business practice, it’s also great for your credit rating as it clearly shows that you will pay your bills on time; even to the bank in the future
- Are you chasing late payers? Don’t be afraid to adopt a tough stance with non-payments, including letters, emails and calls, dependant on the cost involved it may even be necessary to escalate matters even further(3)
Do you know where you currently stand? So you know the theory behind the science, however, how do you actually measure this in a way that’s easy to understand? How do you monitor the changes that your actions are making? With My Business Profile, you can take control of your Business Credit Report and you can see how lenders view your business. To find out more, click here.