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How to Make Your Business Credit Work For You

Your business credit can make-or-break your ability to get funding from external sources. Discover how you can leverage it to your business’s advantage.


These days, leveraging your business credit effectively is no longer just an option—it’s become a necessity. 

But what is it exactly?

Simply put, business credit is an assessment of a business’s ability to borrow money and repay debts. It is a vital factor in securing loans, negotiating terms with suppliers, and even attracting new partnerships. 

One key aspect here is your business’s credit score. A healthy credit score leads to better loan terms and increased bargaining power, as well as lower interest rates.

In this article, we will dig deeper into what a business credit is and how you can build yours. Discover how to use it to your advantage and ensure your business thrives.


Building and Maintaining a Strong Business Credit Score

Your credit score is like your business’s financial fingerprint. Lenders, suppliers, and even potential business partners refer to it to assess your creditworthiness. 

According to Equifax, a business credit score above 670 is considered good. Businesses with such scores are generally considered low-risk, making them attractive to lenders and suppliers.

One way to get a high credit score is to regularly monitor your credit report. Make sure to keep it up to date. Spotting discrepancies early can save you from potential damage to your business’s credit score.

Also, pay business loans and other debts on time, every time. Doing so will show your reliability which is a major factor that impacts credit scores.


Using Business Credit for Managing Cash Flow

According to Score, 82% of small business failures are due to cash flow problems. As such, cash flow management is crucial for the survival and growth of any small business. 

Business credit, when leveraged strategically, can keep your business operations running smoothly even in times of cash flow unpredictability.

Let’s say you’ve been experiencing an irregular monthly revenue. 

You can tap into a business line of credit to cover short-term cash flow shortfalls. A credit line allows you to draw much-needed funds up to a predetermined limit and offers flexible borrowing options. 

Another method is to take advantage of trade credits with suppliers. Negotiate payment terms with them to ensure your business runs uninterrupted until your revenue becomes more stable.


Leveraging Credit for Investments

Investing in growth opportunities for your business often requires capital. But business cash flow alone may not be sufficient for it. 

This is where your business credit becomes an invaluable resource. 

Loans can help finance your business’s growth opportunities. And, as mentioned, a positive business credit opens your business up to more funding options and at better rates. You can then use your loan to expand operations or streamline your business processes, for example. 

In fact, according to Forbes, 42% of business owners applied for loans for expanding their business for increased market share and revenue streams.

Also, StudyFinds reported that 50% of small business owners plan to adopt new technologies. They’re willing to leverage their business credit to invest in technology that’ll lead to increased business efficiency and productivity.


Managing Debt

Debt can fuel business growth, but too much of it can be a liability. In this case, it can impact your business credit and ability to get additional funding for your business, among others.

According to Investopedia, a good debt-to-income ratio is below 43%. However, many lenders prefer a ratio of 36% or below. 

Ultimately, a low ratio signals to lenders that you won’t overextend financially.

So, keep an eye on your debt-to-income ratio. Only have a sustainable amount of debts—one that you know you can eventually pay back. 

Also, before taking on new debt, develop a debt repayment strategy. Consider how you’ll use your debt to generate enough returns in your business to pay itself off.

Align your debt repayment with your cash flow forecasts to ensure you’ll meet your financial obligations. 


Building Relationships With Your Business Credit

A good business credit does more than improve loan terms. 

It also allows you to build trust with suppliers, lenders, and partners. This trust can translate into better deals, more favourable loan terms, and new opportunities. 

So, build a strong business credit. This can open new doors to partnerships and opportunities. Not to mention it can further reduce your business costs and improve your overall cash flow.


4 Practical Tips For Building and Using Business Credit


Tip #1. Use Credit for Revenue-Generating Activities

To build and maintain a strong business credit, any line of credit you use should support activities that bring business revenue. For instance, focus on expanding to new markets or enhancing product offerings. 

Remember, your credit should be able to generate enough returns to pay itself off.


Tip #2. Keep Personal and Business Finances Separate

It can become difficult to distinguish between your business and personal finances if they’re combined. And this can lead to inaccurate record-keeping, complicating financial tracking and management.

So, make sure your personal and business finance are separate. It will also reflect well on your business credit.


Tip #3. Educate Yourself on Financial Management

Understanding the ins and outs of credit, debt management, and financial forecasting can help you make informed decisions. This is important when facing situations that could impact your company’s financial health. 

For instance, it can help you determine when to tap into a line of credit for additional funding and if you can pay it back.


Tip #4. Consult with Financial Advisors

A professional can offer personalised advice for your business. They can help you address specific financial situations, including those that can impact your credit score and overall business credit

And since they stay updated with the financial regulations, trends, and market conditions, you can be sure that the advice they provide is relevant. This lets you navigate through financial complexities with greater confidence.

Leverage Your Business Credit for Growth

Your business credit can be your ally for continuous business growth and stability. It can be a vital tool in addressing the complexities that come with cash flow management.

And yet, leveraging business credit remains a pivotal strategy that’s underutilised by small businesses. This can hinder them from boosting cash flow and scaling faster.

But you can avoid being like them. If you can strategically use your business credit, you can secure your business’s position for future success.


If you need to quickly tap into your line of credit for additional funding, Unsecured Finance Australia is here to help. Apply online and you can receive your approval within 24 hours. 

Find out more by taking a look at our unsecured business loans.

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