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Improving Credit Worthiness: A Small Business Guide

By: SmallBizClub



Acquiring funding and improving creditworthiness is quite challenging for SMEs. Businesses require capital for a variety of reasons, from operational to expansion. They seek out financiers to increase their creditworthiness and working capital. That said, their creditworthiness is critical to ensuring that they can acquire the funds necessary to operate efficiently.

Credit worthiness is assessed by a variety of elements, the most important of which are your repayment record and credit rating. When determining the chance of default, certain lenders additionally examine available resources and the number of liabilities you have.

SMEs can focus on a few areas to help improve their creditworthiness with the ways listed below:

  1. Get Net-30 Vendor Accounts

Getting net 30 accounts for new businesses with organizations that report to commercial credit agencies is one of the easiest methods in building business creditworthiness. Regular payments generate credit references, which may assist your business credit scores.

A net-30 account gives you 30 days to pay your bill in full after you make purchases. In other words, you can buy now and pay later with vendor credit. This method is also referred to as vendor, supplier, or trade credit. Vendors who report payments to business credit agencies help businesses improve their credit rating.

  1. Keep Up With Your Business Credit Responsibilities

The most important approach to improve business creditworthiness is to pay your invoices on time. This covers your vendors, loans, utilities, and business taxes. Paying late might severely damage your profile and give you a bad credit score. An occasional late payment quickly reduces your capacity to obtain a loan. Conversely, healthy credit habits generate a stronger credit profile over time. So, do make sure to pay your bills in full and on time. Credit bureaus will see that you’re handling your finances responsibly, affecting your company’s credit score positively.

  1. Reduce Debt Levels And Limit Credit Usage

One of the main reasons that hurt your business credit rating is owing to large sums of money to banks and other lenders. While you may require a loan to help grow your company or cover expenses, it’s best to keep your debt to a minimum. Maintaining low debt levels by limiting your credit usage will help improve your credit rating.

  1. Make Rent Payments Count

Using conventional ways to build a strong business credit score can be a lengthy, costly, and stressful procedure. The majority of rent managers and landlords don’t record rent payments to credit bureaus, thereby discarding each monthly payment record. You can declare your own rent to rent reporting services as a tradeline item to improve your business credit score.

  1. Don’t Close Accounts

Small businesses should avoid closing credit accounts and removing them from their credit reports just because they’ve been paid. You’ve probably spent the last few years paying off your credit card bills and may be tempted to close accounts to avoid future debt. Closing these accounts may affect your business credit score, limiting your credit options.

With more credit available, your credit usage ratio will be lower. This is useful because you can utilize 10-30 percent of your credit at any given time.

The idea at which it helps your credit score is when it’s at least 10% to 30% of your credit line, and only when your balance exceeds 30% of your credit line does it impact your score.

  1. Do A Credit Check Regularly

Credit bureaus can provide your business’s credit report. These reports aren’t free, even if you own the business, but they’re always the first step in improving your creditworthiness.

Once you have your score, you may find out which accounts are hurting your report and which elements are disputable. However, it may take months for credit bureaus to track your business. Businesses can generally be traced without registering with credit bureaus. The bureaus must have records of at least four vendors.

To build a small business’ credit history, lenders normally require three business credit cards, two completely paid loans, and five ‘trade credit’ accounts.

  1. A Reliable Business Borrower Has A Long Credit History

Credit history is a major factor in credit scores. A business with an established credit account and a proven record of successful repayments is trusted by both suppliers and vendors. The longer a business’s credit history is, the more impact it has on one’s credit score.

Also, requesting the same loan from many lenders will damage your credit score. So, even a repeat borrower should limit the number of lenders while applying for loans. Preferably, you should only apply to two lenders that you’re certain will accept your application.

  1. Correct Any Inaccuracies In Your Credit Report

It’s critical that the information reported on your business is up to date and accurate. You should contact to dispute any hard inquiries or unpaid accounts in your report. This is a necessary component in enhancing your business’s credit score.

Address any inaccuracies to the credit bureaus and attach any supporting documents. After that, submit it to a credit reporting bureau (CRA). The CRA and data provider must update your credit report which also includes any inaccuracies. Otherwise, you can file a complaint with the Consumer Financial Protection Bureau (CFPB).

  1. Register Your Business

Before applying for a loan, make sure your small business is incorporated as a separate entity under the Companies Act. Opening business accounts or getting business credit cards might help you build your creditworthiness.

Experts should be consulted as it’s vital to know what business credit you can and can’t do. Protecting personal assets with a limited liability company (LLC) or corporation set-up is a benefit you might enjoy after establishing your business’ independent credit.

Banks and credit card issuers generally demand the owner to sign for a loan or card when working with newer businesses. If the company fails, you must still pay the amount.

Seek legal advice and consult with an accountant with proven business knowledge before establishing a business. They can help you identify the best business entity for your financial needs and guarantee your business is on the correct track to financial independence.


Access to business credit is critical for a business’s survival. It helps you to get the funding you need to expand, meet daily expenses, buy inventory, hire more staff, and save cash.

A business’s creditworthiness is assessed by banks, lenders, and suppliers. The more you improve your business credit, the more financial options your business will have. Having strong business credit builds a safety net for your business, making it easier to get the financing you need.

Author: Mia Thomas was born in Kansas City, Missouri. She is the marketing director of Go Design, a prominent behavior research and design company focused on customer decision-making. During her free time, she likes gardening and playing with her Labrador dog, Pika.

Published: March 18, 2022

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