The 5 Best Ways to Repair Damaged Credit for Your Business
It can happen. Perhaps chipped away after a few missteps or gone in one fell swoop, your business credit can wear down. The way to repair damaged credit may be slow but it is manageable with these five steps.
Increase Cash Flow
Businesses need cash flow, and loans can be one way to increase it. Credit affects whether or not you receive approval for a loan and it affects the interest rate when you do. Still, you can repair damaged credit without adding on more debt and higher interest rates. Pursue alternative financing, such as factoring, so that you can unlock cash stuck in accounts receivable right away. Also, look for solutions that reduce costs and opportunities to increase revenue.
Balance the Account Books
Similar to increasing cash flow, balance the account books so that you are earning more than you are spending. That requires discipline on your end if you are outspending your profits, and you may need to honestly weigh needs against wants. Then again, it may not be you who is not honoring your debts. Customers with consistently outstanding invoices can pose a risk on your credit if their unpaid debts are leading to your inability to pay down your own.
Prioritize your bills in order of decreasing interest rates. Do not neglect any payments since even paying just the minimum can help repair damaged credit. Skipping payments, though, damages it further. If needed, implement a payment plan with your creditors. Keep balances on credit cards below 50% of the available credit whenever possible.
Separate Trade Credit from Your Personal Credit
Avoid tying your own credit history to your business credit as much as possible. A mortgage should not affect your application for a business loan, and likewise, your business debts should not influence the interest rate you can get on a car loan. Through separation, you can then better track how you repair damaged credit for your business.
Hold onto What Credit and Collateral You Have
Reduce the number of credit cards you use regularly but keep the ones that are paid off. The more credit available to your business, the healthier your credit score. Collateral comes into play for loans, which are oftentimes needed for expanding. Expansion increases cash flow, cash flow allows you to pay down debts and lower debts raises your credit score. This is definitely the kind of cycle you want to have.
Know Your Current Status
Continue to educate yourself on how to repair damaged credit and establish your business’s good name. Watch your credit reports for any changes, catch any errors and keep up the deliberate climb out of debt and into profit.