5 steps on how to build good credit reputation for your small business
We all know that maintaining a good personal credit reputation is highly valued in our current economy. It affects you when trying to rent an apartment, get a telephone subscription, rent a car, get a loan, or get a job where you handle cash. It also affects you as a business owner and can impact your company's financial abilities.
How does Credit Reputation influence your Business?
Let's face it, keeping a good credit reputation is an ongoing task and no one wants to avoid it. Besides establishing a good reputation for your business partners, creditworthiness can help your chances at accessing funding, to help you manage business risk and cash flow.
At Ferratum, we look at thousands of SMEs every month and we can tell you one thing for sure - assessing, planning and following a strategy for improving your credit reputation is the best way to improve your chances to be able to reach for working capital anytime you might need it.
We advise you to start looking at the following actions for improving and managing your credit reputation.
1. Manage Your Business Finances Responsibly
You probably already know, or at least have some idea, how business credit assessment works, and you might even have processes in place for maintaining and improving your reputation.
According to many professional advisors, the best way to consolidate positive business credit reputation is to make sure your finances are managed responsibly.
But what does this mean? Simply put, making sure you are consistently paying vendors on time.
This has a high impact on your credit reputation because payment history is by far the greatest determining factor in whether you develop a positive business credit rating.
2. Ignoring Your Personal Credit is bad
Your personal credit history remains an important factor when assessing your company creditworthiness, especially in the early days of your company.
You can improve your business’s financial position by exercising positive financial management in your personal and business life. That’s why it’s important to maintain a solid personal credit score.
You might start with developing a routine of checking your personal and business credit reputation and making sure data reported is accurate.
3. Opening a Business Checking Account
Another important aspect is keeping your personal and professions books separate. This means separate bank accounts and separate credit cards. It will help you avoid any misunderstanding with the Tax office and lack of clarity during expenses reconciliations.
4. Credit Monitoring Tools
As your business credit rating can change quite fast, it’s important for you to keep track of these changes so you can take the appropriate action if anything is amiss.
Do your research and keep in mind that some business credit monitoring tools can even notify you automatically when your scores and ratings change.
5. Working on maintaining a Consistent Business Identity
If you want your business to be viewed as a professional entity you should maintain a consistent identity throughout all your communication. You might want to check you are using the same business name, address, and phone number on all your correspondence, invoicing, and marketing materials as well as on social media.
This might not be a simple task considering how many online tools we might be using but doing this will also help you separate your personal identity from your business identity and help the business credit bureaus keep more accurate files on your company.
To sum up, here are the things you could start with:
- Pay your collaborators in due time
- Pay attention to your personal credit history too
- Have separate bank accounts
- Monitor your personal and business credit reputation
- Work to keep your business identity consistent
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