A delay in your accounts receivable is all you (don’t) need for an avalanche to come crashing down on your business credit. When customers pay late, it will inevitably cause a delay in your accounts payable. So how do you remedy this situation once your business credit reports have already taken the hit? How do you repair and build back up your business credit?
There are strategies that you can use in-house to repair business credit issues and help establish strong credit profiles.
- Reduce your debt: It is good for your credit and your financial well-being to keep revolving debt at a minimum. You should not avoid credit cards all together, but while having your business credit repaired it is best to keep your debt utilization ratio as low as possible.
- Make timely payments: While restoring credit make it standard practice to at least pay-on-time. Paying early is even better, the business credit bureaus really like seeing early payments, it will show in your scores. During this step you can also try and work with vendor accounts that you have gone delinquent on, make good on your past payments and build back up the relationship.
- Keep business and personal separate: In order to have established business credit, personal and business accounts must be separated. If you have a history of co-mingling your business and personal expenses, now is the time to put that to rest.
- Add new vendor accounts: It can be tricky to find vendors who report to the business credit bureaus but establishing new accounts and keeping them healthy is a great way to establish credit.
- Vet customers before offering payment terms: Let’s step back to how you got into this problem in the first place – your customers failed to pay on time causing a spiral effect on your ability to pay vendors on time. While you do not want to push away clients, you should think twice before offering payment terms right off the bat. Many companies require that new customers pay upon receipt before extending term conditions.
Business credit repair is not a simple process. Many companies reach out to experts in the business credit industry for help.