With the current economy, small businesses have difficulty acquiring loans due to the closure of the business due to unpaid bills and pressure from employees demanding their payments. To avoid such an outcome, you need to take a step ahead and make your business more credit worth and more convincing to your lenders. Below are tips to make your business more credit-worthy.
Pay your withstanding invoices on time.
Having constant reports from vendors about late payments can have a negative impact on your credit worthiness. Ensure you pay your bills and vendors on the planned payment time. Monitor your business credit report periodically, like after every through, to ensure there are no payments you may have missed, and they are reported as late payments. In other cases, you might realize there is a wrong entry of a late payment that you paid on time, and you can request an investigation.
Separate your personal and business accounts
You can look for small business banking services to open your business accounts. A business account is essential as the lenders will require you to present the logs and all active payments under your business account. This will help you avoid difficulties separating transactions made in the business and those made outside the business. If your reports show positive business transactions, it may positively affect the lenders giving you a loan.
Know your credit score.
A credit score is a report derived from a complex statistical model that predicts the likelihood of default. This information is readily available in credit bureau agencies. A credit score is determined depending on the size, structure, public records, and your business credit history. More importantly, they also look at credit utilization and payment habits. If you end up having adverse credit, this might discourage lenders from giving you credit.
Create a healthy relationship with your vendors and suppliers
Usually, when a business is applying for a loan, you will be required to list some references. Vendors and suppliers are your best candidates if you have a good relationship with them. If you list them down, they might put in a good word for your business, increasing the chances of getting the loan. To develop a good relationship with them, ensure you pay their invoices on time and stay loyal to your suppliers.
Clear your outdated credit profiles
Usually, when taking a loan at a bank, businesses put up collateral in exchange for the loan. According to the Uniform Commercial Code, the bank reports the transaction and notifies the loan payment to the credit agencies. Your credit score will still indicate liability if the bank does not report the repayment, and this will require you to clear your expired credit profiles with the credit agency.
Most operational large businesses at one point needed a loan to keep the business growing, so as your small business grows, you need to be aware of things that might discredit you of a loan. If you can do it independently, you might need to work closely with a professional business manager.