50 % of small businesses will fail in their first year.
95% of small businesses will fail by their fifth year.
The main reason for these failures is money–and the largest single factor is poor or deteriorating credit
- How can I influence my business credit profile?
Knowing what information is most important gives you the inside edge and allows you to pay more attention to the important factors of business credit.
You can develop a strong business credit profile by:
Paying on time– Other companies’ payment experience is the most important information in your business credit profile. Always pay within the terms set forth by your suppliers. This is the most direct way to drive a positive credit rating.
Tip 1: Ensure all relevant trade experiences are represented, or you may not get the credit you deserve for paying bills on time, and for conducting more business. Check your profile often and make sure every vendor payment relationship has been captured.
Tip 2: Keep your personal finances in good order. If you’re the owner of an emerging business without a robust credit profile of its own and your consumer credit profile also may be subject to review. The condition of your personal finances can impact your company’s creditworthiness–although business and personal ratings are kept separate and distinct.
Tip 3: Keep your business credit profile in good order. If you see accounts that aren’t yours, mistakes your bank made, or false negative activity you’ve already addressed, address these inaccuracies. D & B subscribers can sign up with the online tool D & B e-Update, or call their Customer Service Center.
Tip 4: Keep your debt financing down. The capital structure of your business—the extent to which you use equity or debt to finance your operations—is key. If there’s a lot of debt on your balance sheet, in absolute terms or relative to your competitors, businesses are less likely to extend credit.
Tip 5: Contribute to your own profile. Some credit managers prefer detailed reports with lots of supporting information, so they can assess risk based on more data. Communicate as much information about your business as possible for a more robust report.
Compare the key financial indicators in your own report with those of similar companies so you can identify areas for improvement and build your profile for a satisfactory credit investigation.
