Managing your business credit can help pave the way to financial success for your small enterprise. For instance:
- Having a favorable credit record can often be the deciding factor when bankers determine whether or not to lend your business money.
- Showing good credit can sometimes reduce the rate of interest you pay for a business loan or on business credit cards.
- Strong business credit could enable you to finance your business operations through trade credit.
- Knowing the credit ratings of customers can help you make smart decisions about extending credit to customers.
The U.S. Small Business Administration (SBA) has teamed with Dun & Bradstreet (D&B) to provide small-business owners with credit management resources. The resources are designed to help you improve your chances for profitability by understanding the importance and use of business credit.
The nationwide partnership between the SBA and D&B gives small-business owners valuable step-by-step guidance on how to proactively manage their business credit. Small-business owners are advised to take the following five smart steps to establish and maintain a positive business credit file.
“These are five smart and easy steps that any small business can implement to establish and maintain good business credit and protect their businesses,” says SBA Administrator Steve Preston.
- Step One
Start a business credit file. To establish business credit, business owners may need to obtain a D-U-N-S Number, a unique business identification number, to begin to establish a credit file as soon as they start their business.
A D-U-N-S Number by itself won’t establish a D&B credit file for your small business. But it will ensure that your company is listed in D&B’s database. You can complete the online form and get a D-U-N-S Number within 30 days.
- Step Two
Establish a credit history. Business owners should put all expenses in their business name and use a commercial bank account to pay bills, rather than using personal bank accounts. This approach will allow you to build a history of payment behavior that will help establish favorable credit terms for your business.
- Step Three
Pay your business bills on time. Commercial credit scores are influenced by paying bills on time as well as other factors, such as outstanding debts and company revenues.
- Step Four
Monitor and understand your business credit file. Business owners should monitor their credit file before any change occurs that might affect relationships with suppliers, customers and banks.
- Step Five
Monitor customer and supplier credit. Business owners can improve cash flow by knowing the credit standing of business partners before agreeing to payment terms.
SBA Training Resources
The credit management training resources include an online Webinar, CD-ROMs, informational brochures and other resources on how to properly establish and protect your business credit. Resources and information are available on the SBA’s Web site at
www.sba.gov.
For example, you can get online training by going to
www.sba.gov/services/training/onlinecourses/index.html. Under the “Business Management” heading, click “Smart Steps for Managing Business Credit.”
“This new partnership between the SBA and D&B will help small-business owners optimize their business credit profile, which can potentially lower costs of credit and improve cash flow,” says David Kieselstein, senior vice president, Small Business, D&B.
Get Help From AFS ProTalk®
Need to know more about how to build and manage your business credit? Talk to the small-business consultants at ProTalk.
The experienced consultants are just a phone call or mouse click away. And AFS Members have unlimited access to these knowledgeable professionals.
The ProTalk consultants can answer credit questions such as:
- Should I extend credit to customers?
- How can I establish credit for my new business?
- What paperwork is needed for a business loan?
- How can I find a lender that gives small-business loans?
- Are there ways to improve my business credit?
Over the years the ProTalk professionals have consulted with more than 75,000 small-business owners, saving them more than $5 million in professional fees. No matter what your question, they have the answer.
(Posted March 2008)
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