Lending & Finance

 

01 18 2017

01 18 2017

Repair Bad Business Credit with These Simple Steps

Business credit is a rose with thorns. The beauty of it is that you can rely on credit to get the business capital you need at the time that you need it. This can help your company respond quickly to changing market conditions, and get in early on new business opportunities.

The downside, however, is that if you miss payments to creditors, it leaves a mark on your credit score. The result may be the inability to borrow money in the future, lease real estate or equipment, or make sizable purchases on credit. All of these can act as direct hindrances to the growth, and possibly even the survival, of your business – even after you’ve dug your way out of debt.

Fortunately, there are a few strategic steps a small business owner can take to repair bad business credit. Let’s take a look at a few of the most important ones:

Communicate with your creditors

According to the Houston Chronicle contributor David Ingram, the first step to paving a road to better business credit is simply to get in touch with your creditors. At the end of the day, they want your money just as badly as you want to give it to them, so they’ll most likely work with you on creating a repayment plan that makes sense given the circumstances.

“Creditors may suspend your accounts and allow you to pay what you can each month until the debt is paid,” Ingram wrote. “Others may accept a settlement offer, closing your account for a lump sum payment that is lower than your total balance.”

The resolution doesn’t necessarily have to entail one of the two options above. The bottom line is that you and your creditors can typically reach an agreement, as long as you’re transparent with them about your current situation.

Build credit with the help of your suppliers

With a few exceptions, no business really survives in a vacuum. The vast majority of companies rely on third-party suppliers for raw materials, ingredients or wholesale goods. While some suppliers expect payment prior to delivery of these supplies, others will offer “trade credit,” according to Nerdwallet contributor Teddy Nykiel – and this very standard practice may actually be able to help you clamber out of bad credit.

Establishing trade lines essentially gives your small business the option to pay several days or weeks after receipt of the materials.

“If you have this type of accounts-payable relationship, ask your supplier to report your payments to a business credit bureau,” Nykiel wrote. “Your business credit score will get a boost as long as you stick to the terms of the trade agreement.”

Over time, this can help improve your overall credit score.

Make payments on time

It may sound like a no-brainer, but more often than not, late or missed payments are the reasons that a small business ends up with a bad credit score. Sometimes small business owners will pay late only because they want to have a certain amount of merchant capital available to them in a given moment – perhaps because they foresee a big expense up around the bend that could lead to significant return on investment, or maybe because they prefer to have that safety net available at all times.

At the end of the day, however, the best safety net for a small business is good credit, and you’re better off getting a cash advance on a loan than you are putting off on-time payments.

Take out a small-business loan

Late loan repayment may have been what got you into your credit pickle in the first place, so why in the world would anyone with bad credit try to take out a small business loan? Furthermore, is that even possible to do with bad credit?

In response to the first question, taking out a small business loan can actually be your company’s salvation. Often, bad credit is the sign of past indebtedness, or old mistakes that left a dent in your business FICO score. It could have even been the result of EIN theft, which despite reflecting poorly on your company, is in no way your company’s fault.

In response to the second question, regardless of the reason that you’ve ended up with a bad credit score, if you can feasibly repay a small business loan on time, there are plenty of alternative lenders willing to finance your business, despite a less-than-stellar credit score.

“Eliminating your existing debt is a positive first step, but your business will need to continue to borrow money to strengthen your credit rating over time,” Ingram wrote in the Houston Chronicle. “Remember that borrowing money is not necessarily a bad thing; a problem only arises when you’ve borrowed more than you can reasonably repay.”

If you’re confident in your company’s ability to pay off new debts, take out a small business loan. It’s one of the best ways to enhance your credit score.

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General Acceptance

Any applications submitted electronically shall have the same force and effect as if the application bore an inked original signature(s). The above information, together with any accompanying financial statements, schedules, or other materials, is submitted for the purpose of obtaining credit and is warranted to be true, correct, and complete.

 

US Patriot Act:

To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person and business that seeks a business loan.  What this means for you: When you apply for a loan, we will ask for your business name, address, and Tax Identification Number.  We will also ask for your name, address, date of birth, and other information that will allow us to identify you.  We may also ask to see your driver’s license or other identifying documents.

 

For Loan/Merchant Services:

The Merchant and Owner(s)/Officer(s) identified in the application (individually, an “Applicant”) each represents, acknowledges and agrees that (1) all information and documents provided to National Funding, Inc. (“NF”) including credit card processor statements are true, accurate and complete, (2) Applicant will immediately notify NF of any change in such information or financial condition, (3) Applicant authorizes NF to disclose all information and documents that NF may obtain including credit reports to other persons or entities (collectively, “Assignees”) that may be involved with or acquire commercial loans having daily repayment features and/or Merchant Cash Advance transactions, including without limitation the application therefor (collectively, “Transactions”) and each Assignee is authorized to use such information and documents, and share such information and documents with other Assignees, in connection with potential Transactions, (4) each Assignee will rely upon the accuracy and completeness of such information and documents, (5) NF, Assignees, and each of their representatives, successors, assigns and designees (collectively, “Recipients”) are authorized to request and receive any investigative reports, credit reports, statements from creditors or financial institutions, verification of information, or any other information that a Recipient deems necessary, (6) Applicant waives and releases any claims against Recipients and any information-providers arising from any act or omission relating to the requesting, receiving or release of information, and (7) each Owner/Officer represents that he or she is authorized to sign this form on behalf of Merchant.(8) I consent to receive direct mail, faxes, and e-mails sent by National Funding and its affiliates for the purposes of transmitting account updates, requests for information and notices, and (9) this request is for business and not for consumer purposes.

 

For Equipment Services:

I hereby certify: (1) the information provided is true and correct, (2) you are hereby authorized to investigate all bank, credit, and trade references, and said references are hereby authorized to release any requested information to you or your nominee, (3) such authorization shall extend to obtaining personal credit profile in considering this application and subsequently for the purposes of update, renewal or extension of such credit or additional credit and for reviewing or collecting the resulting account, (4) this information may be transmitted by us to you and by you to underwriter(s) for the purpose of granting me credit, either electronically or manually, and that by submitting this application, I take full responsibility for transmission thereof, (5) I am over 18 years of age, (6) I acknowledge my rights under the Fair Credit Reporting Act, (7) I consent to receive direct mail, faxes, and e-mails sent by National Funding and its affiliates for the purposes of transmitting account updates, requests for information and notices, and (8) this request is for business and not for consumer purposes.

The Federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status or age (provided the applicant has the capacity to enter into the binding contract); because all or part of the applicant’s income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. If for any reason your application for business credit is denied, you have the right to a written statement of the specific reasons for the denial. To obtain the statement, please write to National Funding Inc., 9820 Towne Centre Drive, San Diego, California 92121.  Funding amount and credit approval is subject to a full credit profile review.