Business tips

How improving your credit score could benefit your business.

By Joshua Griffin on
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Is a poor business credit score holding you back? Working to boost a less-than-optimal score pays off with a number of perks that can provide long-term benefits for your company.

Expanded payment processing options. 

Bad credit makes your business “high risk” in the eyes of merchant account providers and high-risk accounts can cause some big financial headaches. You’ll pay more in fees for every transaction. Furthermore, some providers may consider it necessary to keep a portion of your profits in “reserve” to cover chargebacks or protect against damages from fraudulent transactions. Even if neither of these scenarios ever occurs, you’re still looking at long wait times between making sales and seeing the money show up in your business bank account. With a higher score, you have more choices for payment processing, can keep more of your profits, and are better able to maintain consistent cash flow.

Improved vendor relationships. 

Good credit translates to reliability in the eyes of vendors because it suggests you have a history of making payments on time and not defaulting on financial agreements. By contrast, vendors may assume they can’t trust businesses with low scores to make good on invoices, which can not only limit your choices but also make it more expensive to do business with vendors who do agree to partner with you.

Improving your score may give you access to the option of buying on credit instead of making large purchases all at once, so you can buy equipment or large lots of inventory without draining your  cash reserves.

Easier access to financing. 

Need a business loan to cover expenses or fund growth? You’ll have a better chance of securing large amounts with favorable terms and low rates if your credit score is good. This is true whether you go to a bank or seek out an alternative lender. Banks are likely to turn you down if your credit is poor and although you may be able to qualify with other lenders, you’ll pay more in fees.

Good credit also opens up the possibility of negotiating better combinations of rates and terms. Lenders may be willing to lower the costs associated with financing or give you a longer window of time in which to pay a loan back. 

Cheaper mortgage and lease rates. 

Expanding your business with a new location or more vehicles costs less with a good credit score for much the same reason as loans do. You should also be able to negotiate lower prices on vehicles, which leaves more money to invest in other potential areas of growth. It all comes down to whether your business is perceived as trustworthy or financially risky — the better your score, the more trust you can build.

Achieving a good credit score unlocks doors to these and numerous other business and financial benefits. Check your credit report with the major credit bureaus to find out where you stand and start taking steps today to improve your numbers.