SMEs with established credit profiles have more options

 

More than one third (38 percent) of firms have indicated that they are experiencing difficulties as a result of tighter lending standards - this issue is expected to continue into the New Year and it is a key reason why SMEs need to ensure their business credit profile is in order.

Business loans with good rates and flexible terms are out there BUT, they will only be available to you if your business has a healthy and well established credit profile. Here's how you can ensure you're on top of all the things you need to do to ensure your business credit profile is in tip top shape: 

Find out what information is included in your credit report

Many SMEs are unaware what information is included on their credit report and how their own behaviours can impact their ability to access credit. A recent study conducted by D&B Australia reveals that 66 percent of firms are prepared to miss supplier payments if they are unable to pay all their accounts, yet they don't realise that by failing to pay these bills they could leave themselves unable to access credit.  

The study also revealed that many firms are unaware of the implications of paying late on their ability to access credit, with close to two thirds indicating that if they knew late payments would detrimentally impact their credit standing they would be more likely to pay on time. Conversely, the listing of early payments with a bureau (improving the credit standing of firms) would make 29 percent of firms more likely to pay promptly.

This is an important point - establishing a sound business credit history first requires an understanding of what information is contained in your report. One of the key items scrutinised by potential lenders are your trade references - that is, your history of payment behaviour with other credit providers (not just financial institutions).

This is considered particularly important because many firms rely heavily on trade finance to fund their operations. In fact, D&B research shows that 36 percent of firms rely more on trade credit than bank credit to manage their operations and a further 26 percent split their funding relatively evenly between the two sources.

So, if you are going to do just one thing to improve your credit profile, start paying your bills on time because financial institutions and credit providers will stringently examine your trade reference checks as part of the credit assessment process.

Find out more about the information that is included on your credit profile >>

Make sure you are building a business credit profile (not personal credit profile)

It is a common occurrence for SMEs to think they are building their business credit profile when in fact, they are really running their business on personal credit. The best way to check that your business credit is functioning the way it should be is to get a copy of your credit history.

Once you have a copy of your business credit report you will be able to see whether the credit you use to run your business is listed on your credit file. If it is not you are inhibiting your ability to establish a credit record for your business and are running the risk of hurting your personal credit record should your business hit a patch of bad luck.

If you discover that you are running your business on personal credit, don't sit back and wait for the right time to rectify your accounts. Get cracking today to find the right source of funding for your business.

Order your company credit report today or find out more about the sources of funding available to SMEs >>

Ensure your personal credit file is also in good health

If your credit facilities are not listed on your company credit report it's highly likely you are running your business on personal credit. Although it is important that you try to avoid this practice, it is also critical that you ensure your personal credit file is in good health because many credit providers will investigate both of your credit profiles before they extend credit to you.

By checking your personal credit file regularly you can ensure that your financials are in order and you can dispute any information that you believe to be inaccurate or incorrect. This is good practice for everyone, not just small business owners.

Order your personal credit report today >>

It is never too late to start building your business credit - regardless of whether you have been operating for 12 months or ten years, a good business credit profile will provide significant benefits to your business.  

 

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