11 New Year Credit Resolutions for Small Business Owners

New Years is your yearly opportunity to break bad habits.

What about the habits you didn’t even know you were committing?

It’s one thing if it’s a habit you neglect, like working out, eating vegetables, or spending time with your mom. It’s another story when your bad habit is something that—unbeknownst to you—is keeping your business from growing.

Scary, right?

This is the world of business credit, where both realized and unknown bad habits lurk in the depths and pop out to bite you at the most inopportune times – like when a partner pulls out without warning, or your vendor applications go mysteriously unanswered.

We don’t want these things to happen to you. We want this New Years to be an opportunity to set things right. So, we’ve compiled these resolutions as building blocks for this coming year, so you can set your credit right before it ever becomes a problem. Let us show you how:

1. Check to see if you have a business credit profile.

Do you know what surprises us most? The fact that a large amount of business owners don’t even realize they have a business credit profile. This blows us away! Of course, you can check with the three major credit bureaus: Dun & Bradstreet, Equifax and Experian. We as business credit experts have our preference, but so do your vendors and partners. So, make sure you have an established profile with all three.

2. Create a D&B business credit profile, if you don’t have one.

There’s a small expense here (unless you’re willing to wait 2 months!), which some business owners balk at. This price, however, is nickels compared to the dollars that will turn into huge expenses you are going to pay over time, especially as your creditors are charging you higher interest rates. Get a discounted D&B D-U-N-S number here, this will help you start building a profile right away. Keep in mind, Experian and Equifax only create profiles once your vendors start reporting!

3. Make sure your profile is accurate.

Think of your business credit report as a job resume. When applying, or seeking new business, you want the information to reflect your accomplishments and be as precise as possible. For example, your report may indicate your business as having three employees—the number when you first started—instead of the hundreds you have now. If a potential partner wants you to provide a service, and they see you only have three employees, they may not think you have the manpower to complete the job and will quickly move on to one of your competitors.

4. Are you paying higher interest rates than necessary causing your profits to be lower?

Having poor or limited business credit profiles could cost a company higher interest rates with vendors, lenders, leases, and even liability insurance. Building the right business credit profile can save a firm millions over time. Once you review your business credit profiles, build them, and improve scores and indexes you will be on your way to lower costs and higher profits.

5. Build better payment terms with vendors.

See, if you buy equipment through financing or leasing, purchase supplies or raw materials from a third party vendor, those purchases can help build your business credit. Ideally you will want to qualify for vendor credit and net-payment terms, yet only businesses with a low risk profile can qualify for such terms. If you are already working with vendors, make sure they report to one (or even all) of the bureaus. If your vendors do not meet qualifications and your purchases go unreported, they will not help build your profiles. This part falls on your vendors, but it’s something you can monitor and follow up on. For a list of vendors who report, speak to one of our business credit specialists.

6. Evaluate your competitors.

First of all, if your competitors have great credit, you better get your stuff together. That said, check this out: When our clients are bidding for a particular job, they have us print out their competitors’ credit report for them. If their competitors’ credit isn’t sound, then not only will they send in the bid with more confidence, but they’ll also attach a copy of their excellent business credit reports/scores and indexes. This could alert the company/partner to check all competitors reports, which could boost our clients chances even further.

7. Think about making payments early (or on time, at the least).

We’ll use this analogy: if you tell someone you’ll meet them at 10:00, yet you continuously show up at 10:30, they probably won’t want to meet you anymore. Right? Similarly, handling your credit payments on time establishes a credibility that can greatly increase your score in indexes. If you are able, paying early could earn you a better score from Dun & Bradstreet, Experian, and Equifax.

8. Monitor your report.

Don’t wait until your credit report has a delinquency to take action on a dispute. If a dispute arises with a creditor or vendor, try to act quickly with a resolution before it turns into a collection. This is something that, if left unresolved, can show up on your report years later and harm your credit scores and indexes..

9. Separate business from personal credit.

A common mistake we see from business owners is when they put business expenses on their personal credit. Not only does this handcuff them for personal approvals, but the debt brought on can also incur high interest rates. Once you separate business and personal credit, you have a much better chance of getting the personal credit you need to fulfill the quality of life you want. Also, if the business fails, you’d be in a better position since you are less personally liable.

10. Educate yourself on the business scores/ indexes and who might be using them.

Business credit is an unregulated industry and there is so much that is overlooked. For example, unlike a personal credit check, anybody can check your business credit reports, scores, and indexes. There is no regulation requiring your approval, your authorization, or even notification after the fact that someone reviewed your credit profile. Whoever is looking just needs the name of your firm and they can pay to view your credit. You’ll want to familiarize yourself with the scores and indexes used to evaluate your business, as they are the factors that lead to high-impacting decisions.

11. Get an analysis.

If you’re at this point, we congratulate you on having a credit profile or having created a credit profile. Now, it’s time to read it and figure out just what everything means and, most importantly, how to act on it. For this part, most businesses, if not all, will work with a professional business credit expert. It allows you to get a thorough understanding of where you are, and to chart a course on how to repair and build your score.

A credit analysis with most companies can be worth thousands of dollars. At North Shore Advisory, we’d like to offer one for free. Afterward, we can work on it with you if you’d like. Either way, you’ll have gotten a free credit review.

Get a free analysis