Strong Business Credit
Do you know what determines the creditworthiness of a business?
The good news is after reading this post you’ll have a clear picture of what types of accounts create a healthy, strong and diverse credit profile.
When it comes to business credit, lenders don’t simply rely on your company’s business credit scores, they also look at your credit diversity, length of payment history, credit limits and credit utilization.
Don’t fall into the trap thinking all you need is an 80 paydex score to get all the financing your company needs.
A blend of credit shows more business reliability in the eyes of lenders. A strong business credit report should show that a business can manage various types of credit such as vendor credit (short term financing), revolving credit (business credit cards), installment loans, lease credit, open credit, etc.
A strong business credit report should also show that your business can manage its debts responsibly while carrying large credit limits with various types of accounts.
Now if you can’t obtain a revolving account such as an unsecured small business credit card why not obtain a secured business credit card? While this is classified as a secured revolving credit account it still allows your business to establish some diversity.
The point I’m making is you should aim to establish a blend of credit which should include vendor accounts, revolving accounts, open credit account, etc. Too many business owners who focus on establishing business credit only focus on one type of credit account such as vendor credit.
Trade credit is short term financing and while it does serve a specific purpose, you will need to show that your business can handle long term financing as well.
Eventually as you establish positive payment history (6-12 months) with vendors and revolving credit accounts you will be in a position to request for a credit limit increase.
As you increase your credit limits you increase the credit capacity and creditworthiness of your business.
A strong business credit profile will help your company qualify for greater financing in the future as other prospective lenders view this as a positive sign that your company can handle large credit limits.
In a nutshell your business credit reports should reflect a diverse set of account types so your company can prove its ability to manage various types of credit and accounts.
Remember, strong business credit reports should show stability, diversity and credit responsibility.
Ready to build strong business credit reports? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to vendor lines of credit, fleet cards, business credit cards with and without a PG, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free business credit building audio seminar ($597 value) =>
To Your Success In Business and in Life!
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About the author
Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, and All Business.com .His articles and blog; Business Credit Blogger.com, have been featured in ‘American Express Small Business’, ‘Business Week’, ‘The Washington Post’, ‘The San Francisco Tribune’,‘Alltop’, and ‘Entrepreneur Connect’. You can also find Marco on Google+.
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