Research from the NSBA Small Business Access to Capital Study found that 20% of small business loans are denied due to business credit. When you need a loan to expand to a new location, buy equipment, or reach the next growth phase, your business credit will play a significant role. Likewise, your business credit can impact your insurance rates and your ability to work with potential suppliers and vendors.
Protecting your business credit, therefore, is not something to ignore. Here’s how to maintain business credit and keep it from stifling your business growth.
While you may be familiar with the elements that can impact your personal credit, business credit scores are slightly different. These scores are determined using the following factors:
- Business longevity: The longer you are in business, the better for your credit.
- Revenue: If you are bringing in revenue, it may have a positive impact on your business credit.
- Assets: Real estate and other high-value assets could raise your business credit score.
- Outstanding debts: Paying off loans and credit cards on time and responsibly will help build your business credit.
- Industry risk: Some businesses, like bars and restaurants, are seen as riskier than others and can cause lenders to assess their credit differently.
- Personal and business loan and credit history: In particular, your personal credit score can impact your business credit, especially if you are a new business.
Sign up for a business credit monitoring service to get alerts about changes to your report to help you catch any problems before they grow too big. Get a copy of your company’s report from Experian, Equifax, Dun & Bradstreet, or another credit reporting service.
Identity theft and other types of fraud are serious risks for all small businesses, which are disproportionately targeted by hackers. Take concrete steps to reduce the risk and protect your business by shredding sensitive documents, including anything with your business name, address, or credit card information on it; using strong passwords and security measures; educating employees about fraud and providing training to spot and prevent fraudulent activity; and monitoring bank account and credit card statements for unauthorized charges. The IRS has a guide for protecting business credit from fraud—as well as what to do if you suspect you are the target of an attack.
Build credit over time by establishing a line of credit before you need it, making payments on time, and making sure you are never over-leveraged. Keep a close eye on your cash flow to ensure you’re always able to make payments and allocate resources responsibly. Maintain strong working relationships with your vendors to ensure there’s stability and predictability to your cash flow. These will help you keep your lenders satisfied and your credit score high.
The Emporia Area Chamber of Commerce offers many resources to help you run your business–including our annual Leadership Emporia Academy. Stop by the Trusler Business Center at 719 Commercial St., call 620-342-1600, or visit our websites at www.emporiakschamber.org and www.emporiaopportunity.com to learn more.
“Let’s Talk Business” is a weekly column of the Emporia Area Chamber of Commerce and Visit Emporia. The mission of the Chamber is to be proactive in creating an environment for business and community success, guided by the vision that positive attitudes promote positive actions. Contact us at 620-342-1600 or chamber@emporiakschamber.org and visit our website at www.emporiakschamber.org.