Do you know What makes up your business credit score? What gives you the best chances of getting a loan? Here are a few items that play a role in your business credit picture, and what you can do to make the most of them:
1. Payment History – Your payment history is such an important factor in your business credit profile because it is what your D&B Paydex score is based on. Many credit opportunities come with a minimum Paydex requirement. What can you do to have a great payment history? Always pay vendors earlier than the Due Date. Making a payment on time is “okay”, but paying early is always best.
2. Credit Applications – Did you know Multiple applications for credit can be a red flag that will keep you from getting approved for a loan? Too many in a small amount of time will make your company look too risky and give an assumption to potential lenders that things are going to just go downward. What you can do to make the best of credit applications is always plan your use of credit accordingly. Along with planning be sure to keep applications to the minimum necessary to accomplish your goals.
3. Blanket UCC Filings – One thing that many many may not realize is that they need to keep track of the order in which they get certain types of loans. Along with that they need to see what UCC filings the lenders are going to be filing. Some lenders may file a “blanket” UCC filing, which essentially says they have an interest in ALL of your assets. These blanket UCC filings will then take precedence over any subsequent ones, which drastically reduces your ability to get credit elsewhere. What can you do? Plan your credit carefully, and negotiate UCC filings according to what your needs are. Here is an example, if you need particular assets excluded from a UCC filing in order for you to use it as security for another loan, be sure to take time in explaining that fact in advance to get those items excluded from any blanket filings.There are experts that recommend opening accounts with competing UCC filings at the same time, and negotiating the details with each party jointly.
4. Company Financials -It’s important to make sure your financials in your credit file are always up to date. If they are not, it could negatively reflect on your company when the lender is comparing the available data. What you can do to make sure everything is always up to date, update your financials on your credit reports so that they reflect your current circumstances, and plan to do so every so often.
5. Company Legal Structure – The legal structure of your company can also affect your business credit. Did you know lenders are less likely to loan money to Sole Proprietorships and Partnerships than Corporations or Limited Liability Companies? If you aren’t incorporated, you definitely should be. The advantages go far past just your ability to get credit. There are several other factors that affect your ability to get credit. This could be from the amount of debt you already have, how heavily invested you are in your company, and even your personal credit.