Effectively running a small business is really a tedious job – you need to make tough business decisions, create a strategic business plan, positive cash flow, quality workforce, planned goals, adequate resources, good financial standing and tools to measure business performance.
Many small businesses keep dropping off from one day’s business challenges to the next. And many are sparkling with competence and a vision to grow. This isn’t just luck– successful business owner’s count on strategic business planning and effective use of available resources to minimize the troubles that lowers a business’s ability to develop and thrive. The way to a successful business management is to observe the industry trends and generate opportunities that follow prospective growth and financial viability. Have you ever had to make a decision whether to pay creditors or upgrade equipment?
Many small business owners usually prefer upgrading equipment but, not paying your creditors does more harm to your business and also hurts your business credit scores. Non-payment or delayed payments can sink your business credit score and harm your business credit health. Your business credit standing is one element that lenders and vendors takes into account while reviewing your business financial health. Many small business owners usually make common credit mistakes accidentally, which should be avoided to secure business’s credibility and financial health. Let’s discuss those common credit mistakes:
- Evading Credit Report Errors
Among many small businesses, credit report errors are common. According to a survey, many small business owners evade errors on their business credit reports. These credit errors can seriously affect your business in terms of financing and can kill your credit ratings.
Inequitable business profile is another common mistake. The credit bureau takes 4 main factors into account and minimum of 3 factors have to match when populating a consumer report: Social Security Number (SSN), Name, Address and Date of Birth. For a small business, the bureaus takes into account just use the business name and address. So, it’s easy to delude businesses that share a common DBA. To make sure your information is accurate on the credit reports, you should review your reports from the credit agencies Experian, TransUnion, Equifax and Dun & Bradstreet.
- Late Payment of Bills
Delayed in making bill payment is the major factor that can seriously hurt your credit scores. Personal credit allows 30 days for bill payment and delay can lowers your credit scores. A single day late in making payment can make your scores drop in case of business.
Making timely payment of bills on or before time can get you high credit score and more financing opportunities in future. The ideal credit score for a business is over 700. With a good credit score, you can discuss better rate and lower interest rate, get a credit card, and get more lending benefits. An improved credit score will save you more money and get you more opportunities in the long run.
3. Counting On Personal Credit Ratings
As a startup, every business owner usually relies on personal credit to fund business growth. But, using your personal credit cards for business can ruin your personal credit scores as well as your business credit.
You can use your personal credit card exclusively for business. It will help improve your personal credit if handle sensibly by making timely payments and keeping low balance with respect to your available credit. On the other hand, use of personal credit for business purposes will make you held personally liable if your business defaults on making payments.
The best way is to get a business credit card. You need to make sure the card have your company’s name and only reports to your business credit, and not to the personal credit. You might not qualify for a big credit line initially, but it’ll build your business credit and let you acquire more capital in the end.
- Overlooking Credit
Overlooking credit scores is another common mistake done by small business owners. They review it only when they need it. Lenders frequently examine business’ credit, and as a business owner you should take some time to review as well. This doesn’t mean some extra work. There are many free business credit monitoring tools available online that you can use to get an alert of the changes. A business credit is normally doesn’t change much, and a little drop can be a signal of something serious, like identity theft. Small businesses are vulnerable to identity theft as customers.
Don’t create problems for yourself by making avoidable credit mistakes when you have many others while running a business. These mistakes can be easily avoided and can save you a lot of time and stress.