Credit Tips for Small Business Owners

by Joe Emory, Certified Leasing Professional
Regional Finance and Leasing

Whether building a business, or maintaining business growth, there is often a need for credit or borrowing along the way. Many business owners have wondered if the old adage is true – “the bank will be happy to lend to you if you can show them you don’t need it”.

While there are as many variables in lending as there are lenders, it is certain that “putting your best foot forward” is a good approach to getting favorable results in your credit requests. For the small business owner, that may involve ……

… a review of some basic business planning and budgeting to demonstrate the capacity to pay obligations. Can you show how easily your company can repay?

…or… making it easier for your lender to see your, good references, stability, and good credit character.

Here are 5 tips on how you can improve your credit appeal to lenders...

1) Be visible.
Business listings are important. Dun and Bradstreet is the most commonly known and is a good place to start (there are at least 3 others you should learn about).

Visit Dun & Bradstreet - D&B to check to see if you’re listed. Even small proprietors should be sure to have a business phone listing in the white pages or yellow pages

2) Put it on paper.
Prepare and/or update a one page Schedule of References. Usually your commercial checking and bank contact are at the head of the list followed commercial landlord or mortgage holder, then by suppliers with whom you have terms. Be sure your larger references are listed here. If you rent a big piece of equipment, be sure that vendor is listed as a credit reference.

3) Profits and projections.
Again, put it on paper. Can you show how your business is doing compared to budget ? Are your expenses under control so you have a profit? All businesses  should have periodic financial statements to detail their revenues, expenses, and cash flows. The extent would be relative to their size of course, but nearly any small business owner can do well with basic bookkeeping software from the office supply store. While recent business tax returns are useful, they are often 6 – 12 months, even up to 18 months old which gives a lender no information of how you’re doing now.

4) Manage your debt.
It is very important to keep your obligations current at all times. While this may seem quite obvious, there are times when perhaps a disputed bill gets tabled until issues are resolved which can take a while. Be sure to keep active with a payment within terms especially with a supplier that reports to Dun and Bradstreet. Never let a late bill run past 30 days; avoid the ill advised practice of doubling up the next payment. (This holds true with your consumer credit as well!)

5) Principals review.
Its likely the owners of your business personally guarantee all or most of your bank loan or credit based borrowings, so reviewing your individual credit profiles is a must-do to assure accuracy. Review any one of your 3 major credit bureaus by visiting https://www.annualcreditreport.com/cra/index .  A good strategy is check back twice more in the next 4 to 9 months to review the other 2 bureaus as you’re entitled nowadays to a free report on each bureau every year.

While there are many factors to building and maintaining a desirable credit rating, an understanding of the 5 C’s of credit can be useful to guide your yearly planning. In addition, we’re compiling more practical tips and references to help our clients and future clients qualify for suitable financing and leasing programs. We’d enjoy hearing from you if there’s a topic or tip you’d like to see included.

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