An often overlooked attribute of business credit is its ability to positively enhance your credit profile. This is, of course, in addition to the fact that it helps your company maintain positive cash flow through the deferral of payments for the price of interest on the principal. Your business credit profile is just as important to your business as your personal credit profile is to your ability to secure credit cards and personal loans with stellar interest rates. In the following, we’ll encounter the most important attributes of business credit that helps you with vendor credit lines.
The Effects of Credit Reporting
One of the chief ways to build credit for your business is the simple act of actually reporting your credit history to the relevant bureaus. How important is this? Consider that despite the registered half-a-million vendors out there willing to extend business credit, only 6,000 or so submit their reports to bureaus. As such, there is a serious deficit that you can take advantage of by simply being one of the businesses that does report your credit history.
The Frequency of Reporting Matters
It turns out that reporting the credit status/rating of your business should not be a one-time thing; payment histories are updated relatively frequently – from once per quarter to once per year, depending on the credit bureau. By reporting frequently, you build your business credit history faster, which of course will help you with lenders. If you liaise with suppliers, a steadily-improving credit history will result in greater and greater access to supplies and better rates.
Credit Vendor Selection is Important
Due to the importance of credit limit recommendations, you will want to carefully pick credit vendors – not all of them have the same accounting and reporting procedures. For example, if they don’t report your true credit limit based on the limit of the card you’re using, minus what you spent, then the impact to your credit will be lower.
For more information on the importance of building credit specifically for your business, please reach out to us at Sterling Capital Consulting.