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How To Get The Best Credit Score For Your Small Business

August 29, 2012

If you were kayaking when the skies started to darken and the water began to get choppy, you would head for safer shores. That is how quickly you need to act when I tell you that juggling your firm’s bill payment is creating a circus instead of the best credit score for your small business.

In other words, doing triage among your suppliers’ bills not only hurts your company, it ruins your credit score.

business planning on a whiteboard assuming you have the best credit score
The best business plans are viable when you have the best credit score.

Further to the point, you should be tracking the creditworthiness of your clients. This is key to managing your cash flow and knowing when your counterparties will make their payments. Banks and factoring companies also look at the payment history of your clients to determine how much credit to extend to your business.

One very savvy financial executive who used to advise big global corporate decision-makers was herself thrown from the saddle when several of her clients hit the dot-com bust of 2001. As her clients found themselves overextended, she did too. And with a deteriorating credit score, her only option was retrenching to stem losses.

Many reasons why a small business should focus on getting the best credit score

We can thank today’s most recently acquired firm, Hudson City Bancorp, for teaching us that credit scores do matter. If a mortgage lender does not carefully monitor the credit scores of their potential customers, then it may get burned by delinquencies or similar. As their profit margin compacts, so goes their independence.

This is a mistake that small businesses make, too. Many small businesses don’t take the time or make the effort to learn how to get the best credit score. This may be due to the fact that the executives are only thinking of financing as a function of their credit score. But in fact, the firms with the best credit scores can negotiate advantageous deals for utilities, telephone and banking.

This is true regardless of whether your business lies in food service, manufacturing, retail sales or other vertical.

Every small business owner should take these 7 steps to get the best credit score for their enterprise

  1. Take charge and start building a positive credit profile for your business. The major players in this arena include Dun and& Bradstreet, Credit.net from Infogroup and Smartbusinessreports.com from Experian.
  2. Speak with professionals at the credit agencies to learn what comprises your business credit score and how you can burnish it.
  3. Make sure that the information you register with business directories is accurate and fully disclosed. If you don’t take the time to register pertinent information, the gaps in your profile may translate to increased risk in a lender’s analysis.
  4. Recognize that anyone can obtain a copy of your business credit score, even without your permission. So invest the time to monitor your business credit score so that you get the best credit score that you are entitled to.
  5. If you discover that your firm is not being given the best score that it deserves, submit your dispute in writing to the credit agency so they begin to investigate.
  6. It could take up to 30 days to resolve a dispute so keep on top of it and follow it through to its conclusion.
  7. Monitor the credit scores of your customers. You don’t want to find a nasty surprise waiting in the wings.

Recognize that the credit score of your partners also plays a role in accessing alternative forms of financing, including accounts receivable financing.

Some factoring firms offer credit investigation services along with capital. If you experience difficulties determining the hard-nosed, true creditworthiness of a potential business partner, then utilize an outside resource.

Photo courtesy of Creative Commons 2.0, bisgovuk.

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