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3 Ways Companies Can Increase Their Credit

Topics: Finance, Management

Every business owner worth their salt aspires for their company to reach new heights, and that comes with a tradeoff. To grow your business, you must have the wherewithal to finance the expansion. And often, financing requires the use of credit.

For most B2B ecommerce businesses, the credit limits they currently enjoy don't adequately cover the growth they foresee. If you're in the same boat, playing your cards right makes increasing your limit extremely possible.

A credit boost won’t be served to you on a silver platter, though. There are some risks. For one, getting a better credit limit will prompt creditors to look at your financial situation more closely. The scrutiny can result in a credit rating drop. But the good news is that healthy financial practices make this dip negligible and temporary. If you’ve kept your nose clean, it's a risk worth taking.

So how do you achieve better credit for your business?

Below are some tips.

Establish good credit history and proof of financial responsibility.

You need to start early. Ideally, you should have applied for credit as soon as your business is established, even if you think there's absolutely no need for it yet. The credit doesn’t have to be substantial. A company credit card or a bank loan should be enough.  Even a commercial loan from major retailers like Home Depot could suffice.

Once you’ve done that, you should:

  • Use your credit. If you don’t use your credit at all, there won’t be any payment history to determine your credit rating. Without this, establishments won’t know if they can trust you to pay.
  • Build your credit. Once you’ve established a history of credit use and payment, grow your credit limit even if you don’t need it yet. A higher credit limit decreases your credit utilization numbers, which in turn increases your credit score. Make sure that your credit balance is always below 30% of your credit limit.
  • Keep accurate records of your transactions. Keep track of your credit and financial activities. Doing so ensures you have handy proof of what you have and haven’t yet paid, should they be requested. Keeping your records up-to-date also allows you stay on top of your credit reports (see below).

If you fail to start early, that’s fine. But you need to show that you can pay your debts.

Stay on top of your credit reports

To attain high credit scores, know what’s pulling them down. One way to do this is by analyzing your credit reports.

Credit reports take publicly accessible information about your business and assess whether or not you’re a credit risk. It’s important to note, however, that rating calculations vary per report source. Given this, it’s best to acquire information from the following three agencies:

  • Dun & Bradstreet (D&B). The agency determines your score based on your credit behavior with vendors that report to D&B, the likelihood of your business failing based on industry trends, and the behavior of companies with similar payment histories. You need a D-U-N-S number for this report to be generated.
  • Experian. Experian determines your score based on a range of factors, including how long you’ve been in business, your company’s financial performance, and your credit and payment history. 
  • Equifax. Equifax determines your score based on your available credit and credit history, and the probability of your business closing down or going bankrupt within the next 12 months.

Once you have the reports, keep an eye out for outdated information, mistakes, mismatches with your records, signs of identity theft, and vendors not reporting your payments. Resolve these as quickly as you can. Update your information, report and correct mistakes, contest items, and pay off any debts you may have.

On lenders and creditors

Let’s get one thing out of the way: You can’t stick to just one lender or creditor. Have more than a single source of credit. 

Why?

  • There can be sudden changes to lending policies. Banks, in particular, can lower your credit limit with no warning, and this can affect your finances.
  • Some lenders don’t report good credit performance regularly. If you rely heavily on such types of lenders, you’re compromising your chances of obtaining excellent credit ratings and, by extension, a higher credit limit.

You don’t only need to expand your list of lenders and creditors. You should also ensure you get the best credit value from them, which entails research. Questions you must ask include:

  • Which ones can be trusted for reporting?
  • What are their criteria for accepting or rejecting credit increase applications?

Other financing options

Alternatively, either seek out investors, both formal and informal, such as Kickstarter, or invest in credit management software solutions that let you obtain and, at the same time, manage credit, such as Apruve. These options will help you secure great credit in the future because investors provide the funds to pay for credit and credit management companies like Apruve ensure your accounts receivable and credit situations don’t get out of hand.

Final word

Increasing your credit limit has its challenges. But that doesn’t mean it has to be painful. You only need to apply time, patience, and some savvy to the process, and the next thing you know you have the necessary resources for your business plans to succeed.

Net terms accounts receivable

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ABOUT APRUVE

Apruve enables large enterprises to automate long-tail credit and A/R so you can stop spending 80% of your time and resources on 20% of your revenue. We partner with each of our customers to solve their unique credit, payment, and accounts receivable challenges and build the right credit solutions for your markets, customers, and goals. 

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