Everyone knows that cash flow is the lifeblood of small business.
Fair or not, cash flow very often relies on the personal ability of the principal owner of the business’ credit rating.
Even for incorporated businesses, the thinking goes that the business will behave as a credit entity in the same – or similar – way as that of the owner of the business. If the owner of the business has a less-than-ideal credit score, the business pays a higher interest rate, has to work harder at sales (just to break even), and is on a faster-than-necessary, less-efficient treadmill.
All because of a less than ideal credit score.
Here’s a strategy to get a grip on your score, and improve it as quickly as you can:
- Contact Equifax and TransUnion (the two leading credit rating rating agencies in Canada), and order a detailed copy of your complete credit files. Be prepared to pay a nominal amount to get this vital information.
- When you receive your credit reports – go through them in detail: is there evidence of identity theft, fraud, or debts, missed payments, purchases, or other entries that are not yours? If so – contact the agency ASAP, and begin an investigation (this could take a few months to resolve). Ask to have resolved variances removed from your report.
- Take a look at the number of credit cards you have, and the aggregate credit limit that you hold. Do you really need this amount? Start cancelling cards if you can, as this will signal to credit bureaus and responsible lenders that you are a responsible-with-credit borrower.
- Manage your credit card balances, so that they don’t exceed 30% of your available credit. This also communicates responsibility. If you are offered to increase your credit limit, do so only with this as a guideline.
- Pay down your revolving credit card balances, and pay more than the minimum amount every month – this communicates to the credit bureaus that you take credit risk seriously, and your score will rise.
- Check your credit report once per year, and run-down any variances. Ask to have resolved variances removed from your report.
- Limit how frequently you apply for new credit.
We can help you get a grip on your business’ finances so that you can be positioned for growth.
We’d welcome a coffee-talk.