Looking into protecting your business credit score in a post-Covid economy is always a good idea. Business credit scores are a determining factor used by financing companies to decide whether or not your small business qualifies for financing.
In the context of alternative funding, business credit scores are a simplified confidence indicator of your business’s ability to pay back commercial financing and make payments on time. They simplify the process of analyzing your business’ payment history on its funding, including loans, business credit cards, and other financing tools, boiling them down to a cumulative number. This number can help financing companies decide whether to provide working capital or not.
During the COVID-19 pandemic, some small-business owners thought they didn’t need to worry about protecting their business credit. But the fact is, they should have. Although much of the economy is bouncing back, having good or bad business credit is still a determining factor when obtaining financing for your small business.
If your business has been impacted by the ramifications of the pandemic, your business credit may have followed suit. Here are some tips and tricks to restore your business credit.
Conventional Wisdom About Your Credit Score
Your business credit may have been affected if your business no longer had income due to unemployment, shutdowns, short staffing, or if it lost sales. Your business may now be unable to make its financing payments like it used to. If your business starts skipping payments, your business credit score will likely decline.
Some steps your business can take to restore your business credit after COVID-19 may sound familiar:
- Make your payments on time if your business can.
- Improve your business credit usage percentage by reducing your business debt, if possible.
- Only apply for financing that your business needs.
Additional Steps to Protect Your Credit
- Refinance your business loans:If your business is struggling to pay its outstanding business loans or other debts, looking into locking in a lower rate or inquiring about consolidating unresolved amounts owed could be an option.
A Balance Transfer Could Help Your Credit Score
Another option to restore your business credit is a balance transfer for your business credit card. If you have a growing business credit card balance that your business can’t repay, your business might be able to move the debt to another card with a lower interest rate. This way, your business can eliminate extra interest payments on your business credit card debt.
Rather than letting your business credit card debt get out of control with high-interest rates, your business can stop its growing debt problem for now. Although, it’s only a temporary solution. So, you’ll have a little time to get back to where your business needs to be, but the debt still exists. Once your business is capable, consider setting the goal of eliminating credit card debt for good.
More Steps You Can Take to Restore Your Business Credit
- Check your business credit often. Making sure your business credit report is accurate is more important than ever. If you check your business report often, you can catch any fraudulent activity before it can impact your business credit report.
- Dispute anything inaccurate. Many credit reporting companies allow your business to dispute anything you find that appears fraudulent.
- Protect your Business. Cyber threats and other scams are usually more prevalent during times of crisis. Create strong passwords, implement cyber security best practices, and don’t take the bait on scams.
- Seek financial assistance. Your business can work with a certified credit counselor if you need help managing your business debt. Some nonprofit counselors can help as well.
- Consider a business line of credit. Rather than taking out a potentially high-interest loan, consider a business line of credit that gives your business access to working capital fast.
- Plan ahead. Tighten your business budget to ensure you have the funds your business needs for necessary expenses. Budgets are always helpful, but to restore your business credit score, your business should be especially strict with budgeting.
Restoring your business credit score now is more important than ever. Protect your business credit by following these suggestions.
If your business is having trouble paying your bills, reach out to your finances to find out what kind of help they might be able to give you.