According to Dun and Bradstreet, there are some valid reasons why a healthy business credit profile is vital for a business:
• Business financing: Without business credit ratings, a supplier may require cash on delivery or ask for a personal guarantee. When business credit ratings are high, lenders and suppliers give favorable terms to purchase with credit.
• Supplier contracts: If your company wants to do business with government agencies or Fortune 500 companies, there is an extremely high chance they will review your business credit reports and make awards based on those ratings.
• Business separation: Personal credit and business credit are completely separated when a small business reports credit and maintains business credit independently.
• Personal credit protection: With favorable business credit ratings, a business can obtain financing from companies willing to grant credit without a personal credit check or guarantor. This allows a business to acquire products and services it needs on credit without putting the business owner’s personal credit at risk.
• Business partners: Business credit reports are frequently being pulled by potential business partners so they can find out about a company’s credit history and decide if the business is capable of being a sound business partner. Unlike personal credit reports, business credit reports are available to the public.
Factoring can help increase healthy credit. The misnomer of Factoring is that it might be a negative or lending of last resort, but the truth is that when you factor, the positive cash flow is reported to the Credit agencies every 6 months! This dramatically increases a businesses ratings in these agencies. A business has cash available and is not dependent on the cash flow cycle of its customers to determine its own credit rating. With cash on hand, a business owner can even make money by taking advantage of discounts out there; 2%-10. net 30 in most cases. In fact, the government, being the largest contractor in the WORLD, favorably views factoring, and knows that a savvy business owner with factoring in place has negotiating skills with suppliers, good business cash flow, and a consistent ability to provide the goods promised on time.