Make your business more creditworthy

The current environment for small businesses trying to access credit is difficult. The reduction in the number of non-bank lenders caused by the GFC has impacted market competiveness and despite improving economic conditions financial institutions still remain cautious about lending. This means that small businesses need to make sure they are as credit worthy as possible. Every transaction your operation makes affects the business world's perception of you and impacts on the decision-making process creditors and/or banks will undertake before providing credit. By keeping your credit profile in good shape, you put yourself in the best position to receive credit from lending institutions as well as other businesses. What follows is some useful advice on how to strengthen your business's credit profile:

Don't use personal credit accounts when doing business

You want your credit profile to provide the best reflection of your business. To achieve this try to avoid using your business's credit facilities to make personal purchases, as any late payments for these transactions will be recorded against your business, affecting your business's credit rating.

The opposite scenario is also true. If you use personal credit facilities to run your business and your business hits a bad patch it will be reflected in your personal credit history. This will adversely affect you in the future when applying for personal loans.

As many credit providers will check both personal and business credit facilities before extending credit it is critical that you maintain healthy credit records for your business and personally. 

Order your company credit report or click here to get a copy of your personal credit report today >>

Pay suppliers on time

Paying your suppliers on time strengthens your credit track record. Every business decision and transaction you undertake can be recorded in your business's credit report.  Purchasing histories - including major transactions such as paying vendors or making lease or mortgage payments as well as smaller transactions such as equipment leasing, advertising and shipping packages - is information suppliers, service providers, customers and business partners can view when accessing your credit information. A solid payment history is a good indicator of future performances and potential suppliers will check trade references before supplying credit. Remember, late payments are being recorded on your company's credit report so they can be seen by any organisation that wants to conduct business with you.

Importantly, a good credit record also improves the relationship you have with your suppliers. In Australia many firms rely heavily on trade finance to fund their operations. In fact, 23 percent of Australian firms rely more on trade credit than bank credit and an additional 38 percent split their funding relatively evenly between the two sources.

For more information on managing your payments to suppliers read 'Cash Flow Karma'>>

Update your credit report

Suppliers and creditors are more likely to grant you credit if they can obtain an up-to-date copy of your credit history. Therefore it is important to regularly contact companies such as Dun and Bradstreet and provide high-level financial data including revenue, assets and loan facilities. Submitting audited financial statements to credit agencies is an even better way of portraying your company's financial history.

For more information on credit reporting, click here>>

Ask your suppliers to report transactions to credit agencies

If you have a good record of paying suppliers on time you want to know that potential suppliers can find out about it. In order to achieve this you need to ask your suppliers to report transactions with your business to a credit agency. As it is not compulsory for companies to report payments and transactions it is best to be proactive and send them a trade reference request. Once information is confirmed with suppliers it can be added to your company's credit report.

Report changes in your business

As your business changes it is good to report any changes to a credit reporting agency. An increase in employee numbers shows that your business in expanding and reporting these changes can help your business obtain credit.

Credit is crucial to the operations of any small business; it can ease cash flow pressures and give your business the breathing space to grow. If your business is seeking credit make sure it is as creditworthy as possible.

For more information on how your business can benefit from an up to date credit profile read, SMEs with established credit profiles have more options>>

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