Credit is the lifeblood of any business. Yet even established business owners can have trouble accessing the capital they need. Consider these steps for making your business more creditworthy:
1. Keep it strictly business. The Small Business Administration reports that only 50 percent of business owners surveyed are using business credit for their business purchases, while the other half are using personal credit. For credit reporting purposes, it's important that your business be viewed as a separate entity from you personally. Start by establishing business bank accounts in your business's name using a federal tax ID. Payment activity under these accounts will then be reported to credit reporting agencies under the name of the business.
2. Submit your financials. Make sure credit reporting agencies, such as Dun & Bradstreet, have accurate information about your company's financial history. Here, a full-blown, audited financial statement is typically not required. Simply provide the high-level data points that tell your story — current assets and liabilities, net working capital, etc. Be sure to amend any incorrect or out-of-date business information to keep your credit profile up to date.
3. Clear out outdated public filings. Typically, lenders require businesses to provide collateral when borrowing to purchase large equipment. Under the Uniform Commercial Code (UCC), lenders report the transaction and the collateral being used. Once the loan is paid off, the collateral asset is no longer at risk. But if the lender does not report the loan as paid off, your credit report may still reflect this liability.
4. Monitor your business credit report. Just like your personal credit report, your business credit report may not always be 100 percent accurate. Check with reporting agencies, such as Experian and Dun & Bradstreet, to see if they have your business on file. For a fee, you can often see your report within minutes. On some websites, you can see how many trade lines your report contains before pulling the trigger. No sense spending the money just to find out there are no lenders reporting on your credit file. If you have numerous lenders and trade lines, you may want to opt for an annual plan that allows you to review your credit report throughout the year.
Get the Credit You Deserve
As a business client of City National, you enjoy access to a relationship manager and teams of experienced professionals who take the time to thoroughly understand the financing needs of your business. They can recommend an array of small business lending products that are right for you — everything from term loans and lines of credit to SBA lending and export financing. To learn more, call us at (800) 773-7100 or visit your local City National office.