Fixing Credit Challenges in a Challenging Business Economy
Long-term business growth is greatly dependent on how well a business manages its finances. And in the past few months with the COVID pandemic, it has become apparent that the survival of small businesses is fragile–even when expenses are low and profits are high. Since March of 2020 an estimated 100,000 small businesses have closed its doors and that number is growing.
In response the Small Business Administration provided 4.2 million American businesses with loans and grants. For these entrepreneurs, this was great relief in a time of great hardship.
Yet for others–especially those with bad business credit–the ability to stay afloat with the help of SBA was not always present. And as a result, some small business owners received a serious wakup call: rebuild your business credit.
After all, if you cannot manage your business’ finances in good times, what will happen when business slows down and you’re in need of help? If you have had difficulty in the past staying on top of your business finances, follow these steps to improving your credit.
Read This: 6 Ways to Improve Your Business Cash Flow
What’s Your Credit Score?
A 2015 survey by Nav found that small business owners who knew their credit scores were 41 percent more likely to be approved for financing. The first step to improving your credit score is knowing your credit score.
Report Inaccurate Information on Your Business Credit Report
Next, it’s time to identify inaccurate information.
Are there accounts that you have paid but are listed with an outstanding balance? If so, contact the credit reporting agency immediately. Lenders have 30 days to prove the accuracy of a charge or it will be removed.
Are there accounts present on your credit report that do not belong to your business? If it is not an account that you recognize, immediately contact the credit reporting agency. You may be a victime of credit fraud.
Read This: 4 Reasons to Monitor Your Business Credit
Identify Past-Due Accounts
Contact your vendors and creditors and create a plan to bring your accounts current. By repaying bills that have been long overdue, you are showing your creditors that you are committed to reestablishing a good business relationship.
Be honest, direct and make repayment plans that you can afford. In some instances, creditors can remove negative marks from your credit report if you make your payments on time, immediately improving your score.
Lower Credit Balances
Your business credit card balances should be no higher than 30 percent of your total credit limit. If you are using more than 30 percent of your total credit limit develop a financial budget and stop relying on your credit cards to keep your business afloat.
Instead, set a goal to pay your credit cards down so they are at or below the 30 percent utilization mark. Remember that credit agencies want to see that you take on credit and use it wisely. So even if you payoff a credit card or line of credit balance, do not close your account. Doing will negatively impact your credit score.
Set a Schedule to Pay Your Bills On Time
If you have several vendors and lenders, it can be easy to forget to pay a bill. Therefore, establish a payment schedule that will allow you to make all of your payments on time. Once you are paying your bills on time, ask your vendors and lenders to positively report this to your credit reporting agency.
Taking steps to improve your credit is one of the most important investments you can make in your business. Work hard to manage your incoming cash flow so that you can pay your expenses on time. By paying your business vendors and lenders in a timely fashion, you are safeguarding yourself against being turned away from financial help when you need it most.