Five ways to improve your company’s credit access
For many firms, credit is the catalyst for early growth as well as a vital source of continuous cash. However, accessing capital when you need it is not always easy. Below, we explore five ways to boost your company’s access to credit.
- Consider your personal credit rating - You may not realise, but your personal credit rating can hinder access to business credit, particularly if you’re a sole trader. It’s therefore worthwhile to follow the same good practices you would in business when making personal payments, ensuring terms are met on time as much as possible. A lender is also likely to view the credit report of a business partner or investor before making a decision, so be sure to check that all involved have a healthy credit history.
- Apply for credit before you need it - By building a good credit history early on, before you need it, you’ll make it easier for your firm to secure credit when it’s required. Some lenders will only be comfortable extending credit to those who have been established for at least two years, but with a business credit card or small bank loan you can build a healthy credit rating from the start-up stage.
- Keep your credit activity high - Most often, those firms with a strong credit history will have opened their credit lines early, and actively looked to increase limits as they grow. Even if you don’t need funds immediately, request a credit increase so money is there should you find yourself short. By having a maximum amount you’ll comfortably fall within, you can also establish positive payment behaviour and demonstrate that your firm has a low credit risk.
- Establish multiple lender relationships - Lenders can alter their credit management policies with little notice, which has the potential to negatively impact your access to cash. By forging and maintaining relationships with multiple lenders, you can lower this risk and choose a bank that meets your needs at a particular time.
- Consider alternative finance - Finally, remember that traditional lines of credit aren’t your only option, as today’s alternative finance industry presents you with various opportunities to fund the business. Crowdfunding, invoice trading, angel investment and asset-based lending are all viable options, so be sure to explore what’s out there and make a choice that’s right for your business.
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