Maintaining company credit allows companies to utilise debt to increase cash flow. Cash flow enables organisations to pay off short-term obligations while increasing profit margins. This free paper will teach you how to keep your company credit in good standing.
Table of Contents
The Advantages of Keeping Business Credit
There are several advantages to obtaining and keeping established lines of company credit. We’ll go through some of the most crucial reasons to get and keep company credit lines.
Loan qualification – the better your company credit score, the simpler it will be to get a loan.
Better loan terms – the higher your company credit score, the better your loan terms.
Protect your personal credit – Having established lines of company credit eliminates the need to use your personal credit.
Negotiate better terms with suppliers – the higher your company credit score, the better your position to negotiate terms with new and current vendors, lenders, and creditors.
Create cash flow for possibilities for development and expansion – the more cash you have in your company checking account, the more power you have for developing and expanding your firm.
Important: While personal credit is protected by privacy regulations, corporate credit is not, and anybody may acquire access to your company information.
What Are the Three Major Commercial Credit Bureaus?
Businesses have their own credit reports, which are similar to personal credit reports. Business credit reporting organisations (business credit bureaus) create these reports, which lenders use to establish a company’s creditworthiness. There are three major commercial credit bureaus:
Dun & Bradstreet Inc.
Experian Business Services
Equifax Small Business Services
Dun & Bradstreet Inc.
Dun & Bradstreet, which has been in operation since the 1960s, is the most important corporate credit bureau. Every firm in Dun & Bradstreet’s system is assigned a DUNS number (a unique nine-digit identity). When a vendor or lender determines whether or not to give credit to a business, they will utilise this number to get a credit report in order to assess the credit rating of the company.
Create a Dun & Bradstreet credit profile by completing these simple steps:
Ascertain if your company is a distinct legal entity. We advise establishing a limited liability business (LLC).
The Internal Revenue Service may provide you with an Employer Identification Number (EIN) (IRS). This is required to establish a business bank account.
Open a business bank account with your company’s precise legal name. Check that it corresponds to the name on your LLC application.
Make sure you have a business phone number that is listed in the 411 directory. This demonstrates to potential creditors that you are a reputable firm.
Locate and apply for credit with Dun & Bradstreet merchants.
Check your company credit profile on a regular basis to confirm that you have established trade lines with these suppliers and that they are appropriately reporting all of your business information.
Experian Business Services
Another major business credit bureau is Experian Business. Follow these steps to create a business profile with Experian Business:
Ascertain if your company is a distinct legal entity. We propose establishing an LLC.
The IRS will issue you an EIN. This is required to establish a business bank account.
Open a business bank account with your company’s precise legal name. Check that it corresponds to the name on your LLC application.
Make sure you have a business phone number that is listed in the 411 directory. This demonstrates to potential creditors that you are a reputable firm.
Find and apply for credit with Experian Business-reporting vendors.
Check your company credit profile on a regular basis to confirm that you have established trade lines with these suppliers and that they are appropriately reporting all of your business information.
Equifax Small Business Services
While Equifax is not as widely utilised for reporting as Dun & Bradstreet and Experian Business, it is nonetheless a credit agency that should not be overlooked. Multiple company credit bureaus are often reported to by suppliers, lenders, and creditors.
The good news is that creating a business credit profile with Equifax Small Business is similar to creating one with Experian Business.
Follow these measures to ensure that suppliers report your timely payments to Equifax Small Business:
Ascertain if your company is a distinct legal entity. We propose establishing an LLC.
The IRS will issue you an EIN. This is required to establish a business bank account.
Open a business bank account with your company’s precise legal name. Check that it corresponds to the name on your LLC application.
Make sure you have a business phone number that is listed in the 411 directory. This demonstrates to potential creditors that you are a reputable firm.
Find and apply for credit with Equifax Small Business suppliers.
Check your company credit profile on a regular basis to confirm that you have established trade lines with these suppliers and that they are appropriately reporting all of your business information.
Account Management and Business Credit Profiles
You must monitor your business credit reports in addition to your suppliers, lenders, other business creditors, and company credit card accounts. This is why:
Accounts are not always appropriately reported (e.g., your business address could be incorrectly stated, affecting your business credit score).
Delinquent business debts may not be updated after they have been paid off. To have the delinquent erased, you may need to contact both the vendor and the business credit bureau agency.
Your credit record will not reflect every bill you pay. You may need to request that a vendor report a payment.
Fraud is possible. Because business accounts are not private like personal credit accounts, fraudsters may obtain lines of business credit without your knowledge, harming your company credit score.
Business credit reporting bureaus have been known to make errors and mistake one company for another. In some cases, inaccurate information may have an impact on your company’s credit score.
Other factors influence your company credit score (e.g., number of employees, how long the business has been around, business registration details, operational data that gets reported by the bureaus, liens, judgments, and UCC filings, etc.).
Maintaining Business Credit: Follow These Best Practices
After learning the significance of establishing business credit, the top three business credit reporting bureaus and how they operate, the importance of monitoring your vendor, lender, and credit accounts, as well as your business credit reports, it’s time to learn the best practises for maintaining business credit.
Here are some pointers to help you keep your company credit in good standing:
Partner with firms that assist in the establishment and growth of business credit – Not all companies assist in the establishment and growth of business credit. It is critical to work with organisations who frequently report to business credit agencies and are prepared to assist you in building your company credit.
Pay your payments on time, since it’s better to be early than late. The same is true for paying company bills; it is preferable to pay them off early.
Pay off debts – a good rule of thumb is to never spend more than 30% of your company credit lines.
Keep your spending in check – just because you have established company credit does not imply you should waste money.
Understand your credit ratings – a credit score is a picture of your company’s creditworthiness.
Paying tax liens should be a top concern since they may quickly harm your credit rating, damaging the company credit rating you’ve worked so hard to earn.
Set regular reminders – We recommend that you check your credit reports and communicate with suppliers, lenders, and creditors on a monthly basis.