10 Can't-Miss Business Credit Profile Tips for Small Business Owners

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Originally posted on the SBA.gov Blog

If you run a company, your business credit profile is related to your reputation. With a strong business credit profile, you have access to much greater financing opportunities with favorable terms and lower interest rates.

For lenders, a company with a creditworthy profile is considered a good risk. Whether you own a startup or existing business, managing and protecting your profile with all three major business credit reporting agencies is crucial.

Here are ten essential tips for establishing, maintaining and protecting your business credit profile:

  1. Keep all company data identical – Whether applying for a D-U-N-S Number, submitting a credit application or opening a business bank account, provide all the same information in order to avoid any potential issues. Inconsistent data can cause a denial of credit due to mismatched data or even cause your company to have a duplicate credit file.

  2. Leverage the good credit you already have – If your business has existing trade references not reporting on its file, then consider adding them to your report. Currently, only one business credit reporting agency enables you to add trade references to your file via a paid program.

  3. Make certain your profile represents a real business – The information you supply about your company, its background, banking history and operations plays an essential role in the credibility and creditworthiness of your business. With a complete profile, creditors will get an accurate portrayal of your business.

  4. Pay better than terms – By paying invoices 10, 15 or 20 days ahead of the due date you get a much greater impact to your overall business credit ratings. Paying better than terms shows creditors that you manage your financial obligations promptly and are a good credit risk.

  5. Have a diversity of credit accounts – The types of credit your company use are seen as a sign of stability and credit responsibility. Whether it’s short-term financing, installment loans, revolving lines of business credit or leases, each type of account plays a role in establishing a diversity of credit usage.

  6. Monitor your business credit profile regularly – While it’s crucial to build a strong business credit profile, it is equally important to protect what you have built. Each business credit agency offers its own monitoring services so you can be alerted to any recent changes, inquiries into your file or fluctuations in your scores.

  7. Correct any inaccurate or outdated information – If you identify any mistakes on your company’s profile, be sure to take the necessary steps to update and/or correct it. Each agency has its own procedures for submitting updates, corrections or disputes.

  8. Select the appropriate industry classification code – The SIC/NAICS Code you select for your business describes the principle activity of your business to creditors. Lenders use these codes to help identify the industry affiliation of a company so it is vital to select the code that best describes what you do.

  9. Improve your score by submitting financials – Financials that show an improvement in cash flow, current assets and net worth can have a significant impact to a company’s overall creditworthiness. You can upload financial statements to impact the strength of your reports by following the on-screen instructions available on the business credit agency’s site.

  10. Update and maintain your company’s internet presence – Information that goes into creating a business’ credit profile comes from primary and secondary sources such as web mining, news and media. It’s imperative that your company’s website and its contact information are consistent with the data collected from other primary and secondary sources.

Your business credit profile is a report card on your company’s finances. Your profile and business credit history can affect your day to day business operations – from how much you pay for a business loan, company credit card, lease or business insurance. Use these tips to build, manage and protect your company’s financial reputation.

Marco Carbajo is CEO of the Business Credit Insiders Circle.