Why Managing Your Business Credit is Essential to Your Small Business

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When you are an entrepreneur you are not just the creative part of your business you’re also the CFO, which can at times be daunting. One critical responsibility is to actively manage your business credit. Here are the top reasons why managing your business credit is essential to your growing business.

Good credit means financing at better terms

Most private lenders like BriteCap don’t qualify you based solely on your business credit score, but they do take it into consideration when determining your financing terms. For example, John Scalons, the owner of Bow Wow Meow Pet Company maintained a good business credit report. So, when he needed financing for his small business, he turned to BriteCap. “BriteCap was able to lend my business some much-needed cash flow. This helped with inventory which in return generated more revenue. I was with them for two years, and because of them I am now in my fifth year of business and still growing, he said.”  Simply put, good credit means better rates and a faster loan. According to the SBA, someone with poor credit history could be paying 12% more interest on their loan than someone with good credit. Lenders need to protect themselves too, so if they see a business with poor credit then they will charge more, but with good credit, they will see a trustworthy business owner who knows how to keep their business healthy. This will give you the upper hand to get the amount of financing you need when you need it. Also remember, business credit scores and reports are not restricted like they are with personal credit reports, they are public, and anyone can see them, including potential lenders and suppliers.

Your partner’s credit history

When starting a business or wanting to grow your business, bringing in a business partner can be a great decision. After all two heads are always better than one. Or is it? Make sure you know your partner’s credit history. Partnering with, and trusting your business to someone who has or has had poor credit could potentially harm your business and its potential to grow. Do your research before making a commitment to a partner.

Protects you from Identity Theft

This is probably the most important reason why you should actively manage your business credit file. Giving your credit file more attention helps you safeguard against any fraudulent or incorrect information. Finding these inaccuracies earlier rather than later makes a huge difference in the business you worked so hard to build. Be your own investigator and protect your business the way you protect your home.

What to look for in your business credit report:

  • The number of trade experiences, outstanding balances, payment habits, credit utilization, trends over time.
  • Public records: recency, frequency and dollar amounts associated with any liens, judgments, and/or bankruptcies.
  • Demographic information: years on file, Standard Industrial Classification (SIC) code, business size.
  • Comparative data placing a company’s payment performance in context with its industry
  • Company background
  • Collections information

Manage your business credit and keep your business report up to date. Although it takes some ongoing effort, in the long run, this practice will save you both time and money. When the next big opportunity comes along, and you need financing right away, you will be ready to tackle it head on because you have been actively managing your business credit.  


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