The Five C’s Of Building A Business’s Creditworthiness

Most small business owners work hard to keep their businesses running smoothly by cutting corners, reducing unwanted expenses and making smart business moves. But in all their hard work, most often they forget and undermine the importance of taking care of their business’s credit rating. Creditworthiness plays a big role when you need to look for financing options through business loans or alternative financing sources such as KredX’s invoice discounting services to support or grow your business. In simple terms, a business’s creditworthiness is a valuation performed by these lenders to determine if they are a good fit to be given money to and won’t default any debt. It usually takes factors such as repayment history and credit score into consideration.

So how do you ensure that your business is credit worthy? These 5 C’s below will help you do just that.

Clear your dues on time

Defaulting or delaying paying your bills on time will affect your credit rating negatively and can impact any chances of securing much-needed financing for your business. Paying up on time will not only affect your company’s credit score, but it also helps you maintain a good relationship with your creditors.

Tip: Always pay your credit card bills in full and not just the minimum amount as the remaining amount is considered as an overdue amount and could affect your credit rating.

Clean your debts and limit credit usage

Owing varying amounts to different lenders will play an important role in your business’s creditworthiness. Limit all such debts and credit usage to ensure that you don’t face adverse situations when you actually need the money. Remember, keeping your debt levels low will decrease your credit utilization, thereby increasing your credit rating.

Check your business’s credit report regularly

Many small business owners tend to ignore keeping a tab of their company’s credit scores, but this practice can have an adverse impact in the long run. It is imperative to regularly go over your credit reports to avoid errors that can lower your credit score and the overall creditworthiness of the business.

Create a credit history

While this may go against what most people believe in, remember that creating a credit history gives lenders something to assess your company’s creditworthiness by. Have one or two credit cards for your business to start with and make sure you pay any bills incurred on them well before the due date. Not only will this build a credit history, but also reflect in your report as timely payments, in turn improving your company’s credit score in the process.

Also, keep your credit accounts running and avoid closing them once they are paid in full. Why? Because you would have probably worked tirelessly to repay your debts and closing them would not only remove them from your reports but also may, in turn, limit the amount of credit at your disposal.

Did you know: Your credit exposure contributes to 25% of your credit score!

Correct all errors

Even the simplest of mistakes or errors such as a wrong address or inaccuracy in your name can massively impact your company’s credit rating. Any mistake on the credit report, however small it may be, should be corrected at the earliest.

The pointers mentioned above can help you improve your business’s creditworthiness with a little time and effort. Some hard work now will go a long way in ensuring your company’s financial future and its healthy growth!

If your business is looking for financing to help it grow, you can learn more about how KredX can help here.