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4 Small Business Credit Score Improvement Tips

4 Small Business Credit Score Improvement Tips 1

In order for a small business to maintain its operation access to funding is a requirement in order to achieve growth. Over 70% of small businesses apply for financing according to the National Small Business Association.

However, over 1/3rd that apply for a small business loan get rejected, due to a poor business credit score.

Lenders are looking at the creditworthiness of your business in order to determine if they should approve your application or not. Here are 4 tips on how you can strengthen your business credit rating so as to increase your chances of getting your loan application approved.

1. Dispute Any Errors & Keep Track of Credit Reports

It’s only when the owner of a small business requires access to business financing, they decide to verify their credit history reports at that time. But it is advised that you should review your credit report frequently to address any errors found. As an example if you purchased some new business equipment and repaid it in full, that payoff should be reflected on your credit report. You could get in touch with the credit bureaus to report that finding.

These business reporting agencies are Experian, Equifax and Dun & Bradstreet. Based on your payment history with vendors and loan companies, your business credit score will be determined. There are other factors which can influence the business credit such as your business revenue, the sector or industry and the actual size of your company.

2. Maintain Low Debt Levels

If the debt ratio for your business financing is higher, then it could negatively impact your business credit score. You can reduce any debt related to the business in several ways, such as setting up a structured repayment plan, third party debt restructuring and reducing unnecessary expenses.

If you maintain a low debt ratio, your business credit will get better and any loan provider will take it as you being able to manage your expenses and repaying any debt prior to the date due. Therefore, it’s wise to keep on top of your finances and  manage your revenue according to your cash-flow requirements. You will appear less risky to lenders if your debt ratio is lower.

3. Raise the Credit Accessible on Credit Cards for the Business Credit

In order to reduce your debt ratio while at the same time increasing the funds available to you, you need to repay all outstanding expenses and debts on time. So the lenders do take into consideration your low usage of credit, in comparison to the amount of access to business credit available. You need to also make purchases using your business credit cards often. This in turn will also help to improve your business credit rating overall.

4. Keep Your Cash-Flow Constant

The statistics from the small business administration show that the number one reason that a small business fails is due to a lack of steady cash-flow. Solid cash-flow is a strong suggestion that your company is producing sufficient working capital required to cover all expenses and bills.

Yes, generating consistent sales and developing your brand are imperative, but maintaining cash-flow throughout your business is extremely important. On the downside, your credit score can be damaged if for some reason the money runs out.

So therefore, if your business is experiencing a less than decent business credit score and you still need access to funding quickly, you might want to get in touch with an alternative lender that can help out. It will be a lot easier in the future to access funding if your business credit is strong.

Establishing a strong business credit history should be on the top of your list as an owner of a small business. There are various business financing options available from bad credit loans, loan solutions that enable you to access financing while repairing your business credit at the same time.

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