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Good business credit is the key to getting funding for your venture, but establishing a positive business credit history does not happen overnight. Here are the top three ways to make your business creditworthy.
1. Maintain a Healthy Business Credit Score
Your personal and business credit history is an important aspect that your prospective creditors consider before offering credit. It is therefore important to have a good credit history. Get your credit report from credit bureaus such as TransUnion, Equifax, or Experian at least six months in advance of seeking a loan. It is also a good practice to check your personal and business credit score frequently to avoid surprises.
2. Pay All Invoices on Time
Ensuring all your supplier invoices are paid on time remains essential in running a creditworthy business. If you have been late on an occasional payment or are continuously late in paying your debt, it will adversely affect your credit. A poor track record or worsening payment trend is often considered by credit providers and trading partners as a key indicator of deteriorating cash flow. Paying all invoices on time helps maintain a positive business credit score. It also allows you to gain a reputation as a customer of choice, which in turn allows you to negotiate better prices from suppliers in the market.
3. Maintain Healthy Cash Flow
Healthy cash flow asserts the capacity of the borrower to repay a loan, thus indicating strong creditworthiness. For business loan applications, the lender will review your past cash flow statements to assess your ability to repay the loan and the likelihood of default. Therefore, you must demonstrate a consistent healthy cash flow to prove your ability to pay off future debt and increase your chances of getting approved for credit.
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