Skip to main content

3 Quick tips to establish small business credit

Sageworks
November 27, 2012
Read Time: 0 min

Many small businesses have trouble attaining lines of credit or loans because they don’t have established credit scores.  The Catch-22 is that you need successful transactional histories to increase credit scores, but most suppliers and vendors are hesitant to conduct business on credit if your credit scores are too low or nonexistent. That said, there are a few things small businesses can do to get over these initial hurdles.

Firstly, many manufacturers and suppliers offer discounts for paying in cash or for paying early. Taking advantage of deals, such as “2% 10, net 30” [1], can help a firm in multiple ways. Suppliers are more inclined to give this type of deal than a cash discount, and these deals are a great way for you to save money and build credit if your cash flow can sustain early payments.

Paying off liabilities before maturity dates. Many reporting agencies boost the credit scores of businesses who pay off their liabilities before they mature. This is a quick and easy way for businesses to boost their credit without creating new lines of credit or increasing their total liabilities.

Another great way to establish credit is to convert current cash on delivery transactions to business on credit. This has a few benefits, one of which is that it frees up cash. The business remains more liquid so it can take advantage should an investment opportunity arise. However, it is important to remember that not paying suppliers and vendors on time will hurt your business relationship and creditworthiness; on-time payments must be prioritized.

Some suppliers maybe hesitant to convert CODs to business on account since it means they won’t have cash as quickly. You can alleviate some of their hesitation by presenting your creditworthiness (though financial statements) during negotiations. It’s a great way to show suppliers and creditors that you are in stable financial health and that you can meet your financial obligations.

                                                                                                                                         

[1] This means you will receive a 2% discount if you pay within 10 days of the dispatch of goods, and that the payment is expected within 30 days.

About the Author

Sageworks

Raleigh, N.C.-based Sageworks, a leading provider of lending, credit risk, and portfolio risk software that enables banks and credit unions to efficiently grow and improve the borrower experience, was founded in 1998. Using its platform, Sageworks analyzed over 11.5 million loans, aggregated the corresponding loan data, and created the largest

Full Bio

About Abrigo

Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

Make Big Things Happen.

 

Looking for Banker’s Toolbox? You are in the Right Place!

Banker’s Toolbox is now Abrigo, giving you a single source for all your enterprise risk management needs. Use the login button here, or the link in the top navigation, to log in to Banker’s Toolbox Community Online.

Make yourself at home!

Looking for MainStreet Technologies? You are in the Right Place!

MainStreet Technologies is now Abrigo, giving you a single source for all your enterprise risk management needs. Use the contact us button here, or the link in the top navigation, to reach product support for your MST products.

Make yourself at home!

Looking for Sageworks? You are in the Right Place!

Sageworks is now Abrigo, giving you a single source for all your enterprise risk management needs. Use the login button here, or the link in the top navigation, to log in to your Sageworks products.

Make yourself at home!

Looking for Farin? You are in the Right Place!

Farin is now Abrigo, giving you a single source for all your enterprise risk management needs. Use the login button here, or the link in the top navigation, to log in to your Farin client portal.

Make yourself at home!

Abrigo acquires construction loan management solutions

Coupled with our lending suite, Construct and +Pay from BankLabs enable end-to-end automated residential/commercial construction loans.

Read the press announcement

BankLabs Logo Abrigo Logo