Improve And Monitor Your Small Business Credit Score

A good business credit score can be a cornerstone in the success of your small business. Here are three things you can do to improve it.

Gerri Detweiler, Education Director for Nav | Source: Courtesy
Gerri Detweiler, Education Director for Nav | Source: Courtesy

Generally speaking, good credit empowers small business owners across the board. But there are select businesses and circumstances that make good business credit even more important. If your business falls into any of these three categories, you’ll want to take special care to monitor your business credit.


U.S. Government contractors

In recent years, the U.S. government has successfully met and exceeded its goal for contracts with small businesses, with 25.75% of prime contracts in 2015 being awarded to small businesses, according to the U.S. Small Business Administration.

This is good news for many small businesses across the country. But those contracts will only be available to those that can successfully place a bid, which is where good credit comes in. To do business with the U.S. government, your company must place a bid, and in many cases it will need a surety bond.

Similar to the process of applying for business credit, applying for a surety bond will result in a credit inquiry. Blemishes like delinquencies, bankruptcies and tax liens will mark your company as high risk, and might ultimately prevent you from getting the bond necessary to place your bid. In other words, poor credit could prevent your business from engaging in an otherwise lucrative contract.


Cash flow challenged businesses

Maybe it’s your first year in business. Perhaps your business is significantly vulnerable to seasonality or you’re unsure of how the new administration might affect your small business. These concerns are common across all industries, and having good credit is one way to quell, or at least mitigate, the risk associated with inconsistent cash flow.


Photo: Lukas, Pexels
Photo: Lukas, YFS Magazine

If you need to access capital to accommodate first-year expenses, make up for seasonal dry spells, or accommodate a change in consumer spending in the new year, good credit will make that much easier. Small businesses with good credit are more likely to reap the benefits of easier borrowing, lower APRs and longer repayments terms, all of which can help ease an otherwise heavy burden.


Businesses poised for expansion

Perhaps you plan to tackle an entrance into a new market. With that in mind, big projects might call for big budgets. If your plans require a lot of capital, then good business credit is a big key to your success.

Not only can good business credit secure you better business loan terms, but it can also increase the likelihood that you’ll be approved for the amount of money you need. Looking for business loans with bad credit? Business lending options available to those with bad personal and business credit are quite limited.


How to improve your business credit score

Knowing you need good business credit is one thing, but it’s important to take the proper steps to build it, too. Improving your credit requires some diligence on your part. Here are three things you can do to help improve your business credit score.


1. Monitor your business credit

This should be considered a universal requirement regardless of your credit score. If you have poor credit, monitoring it will help you identify potential problems. If you have good credit, monitoring can help you quickly identify potential problems. For continual coverage, consider using a credit monitoring service.


2. Make payments on time or early

Regularly paying your bills on time or early can have a significant impact over time, particularly when creditors report to business credit reporting agencies like Dun & Bradstreet, Experian, and Equifax.


3. Establish a line of credit with suppliers and vendors

If possible, arrange to accept inventory, supplies, or services using vendor-supplied credit, and make sure those vendors report to the aforementioned credit reporting agencies.


As you approach each new year, analyze your business needs and how your credit score could help or hinder your future plans. Achieving and maintaining a good business credit score can be a cornerstone in the success of your small business.


Gerri Detweiler serves as the Education Director for Nav, which provides business owners with simple tools to build business credit and access to lending options based on their credit scores and needs. She develops educational programs and content for small business owners, and works on advocacy initiatives. A prolific writer, her articles have been featured on popular websites such as Yahoo!, MSN Money, ABCNews, CBSNews, NBCNews, Forbes, The Today Show website and many others. Connect with @navSMB on Twitter.




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