Bolster Your Business’s Credit Rating

Establishing strong credit is a must for many small businesses.

Companies with consistently robust credit scores reap significant benefits including favorable repayment terms, quicker lease approvals, and ready-access to working capital. Bolster your business credit rating by considering the following 5 Ds:

Detailed plan. Step one of building credit is convincing a lender that your company is a good risk. Start with a well-written business plan. The document should address your business structure, the basis for cash flow projections, competition in your industry and locale, pricing, products, and potential obstacles to success.

Discrete accounts. Establish a business credit history separate from your personal finances by using your company’s legal name when opening bank accounts and applying for loans or other types of credit. Then use these accounts – and not your personal accounts – to pay all business expenses.

Diverse credit. Utilize multiple types of debt, including installment loans, revolving loans, and credit cards. Also try to secure debt from multiple institutions. The more banks that will lend you money, the more others will see you as creditworthy.

Due-date awareness. Your business credit rating will climb as managers prove their skill at managing and honoring the firm’s obligations. To judge creditworthiness, lenders watch how your company handles cash flow. If at all possible, invoices should be paid before due dates. Consistently late payments can tank your credit and put future borrowing out of reach.

Diligent monitoring. It’s important to review your company’s credit score periodically. The major reporting agencies—Dun & Bradstreet, Experian, and Equifax—track your business credit and record of on-time payments. Regular monitoring can also identify false liens, inaccurately-reported loans, and other suspicious activity.

As always, we hope you find our tips and news for businesses valuable, and look forward to receiving your feedback. Companies focused on growth have sought the help of Insero & Co. for more than 40 years. During that time they have consistently experienced the peace of mind that comes from knowing their CPA firm takes the concept of integrity seriously. Should you have any questions about segregation of duties, please contact us directly.