Whether your small business is the main way you earn a living or a side business that provides you with extra income, it's important to keep it in good standing with creditors and vendors. You may want to seek business credit for various reasons such as improving monthly cash flow, paying creditors like suppliers on time, and expanding or improving the business.When deciding whether to extend business credit, lenders often look at the business's credit score to find out whether it poses a lending risk. If you've ever paid suppliers late, been delinquent on a debt payment owed by the business, or had issues with tax filing, your business may have a low credit score that prevents lenders from giving you the financing you want or need.
Business credit scores range from 0 to 100, and anything below 75 is considered risky. Business credit scores can be checked for free online, and for under $40 a full report detailing negative items is available. Knowing your business credit score is important before applying for most loans, credit cards or business lines of credit.
How to Raise Your Business Credit ScoreThere are actions you can take to raise your business's credit score. If your business isn't already incorporated, this is the best way to separate your personal credit from that of the business.
The most important thing you can do is to pay invoices on time. On-time payments count as 35% of the score, and even one late payment can move the score down into risky territory. If you do have a history of paying invoices on time, you can ask your creditors to report these payments to credit agencies like Experian and Dun and Bradstreet. Having business lines of credit that are paid on time count positively toward your credit score.
Sometimes it isn't that there are any negatives on your credit report, but that you don't have any established credit. No credit history means your business is one big question mark to creditors, which isn't a positive thing. If you are able to get a business credit card, this can help to establish your business credit. If you don't qualify for a business credit card, you may be able to set up a secured credit card which uses your cash as collateral in case you don't pay.
If your credit is suspect because of tax problems or other delinquencies, paying them off quickly can raise your credit score. Delinquencies stay on your credit report for up to seven years, but a paid off debt will at least raise your score some. Then as time passes, your credit score will come up little by little until the debt finally drops off the report.
Inaccurate items on your credit report should be disputed. If they are proven to be false, they will be removed and your score will rise within a month or two.
Business cash advances do not impact your credit score, and credit scores are not used as criteria for getting an advance. Using a business cash advance to pay off a delinquency or stay current on your invoices can be a wise financial move. Becoming or staying current on your obligations can allow you to qualify for other types of financing that will meet your needs.
Quikstone Capital Solutions provides business cash advances to businesses looking to improve their credit scores and fund their expansion or cash flow needs.
