It’s a common “rookie mistake” to wait until you’re in a cash flow crisis to scramble for credit to fill in the gaps. By approaching small business credit proactively and building it over time, you can avoid these common pitfalls and keep your daily operations on track.
Know the Importance of Starting Early
This may surprise you, but for many businesses it’s easier to get credit and loans early on than it is after 6 months or more in business.
By establishing a line of credit or business loan early on, you get a couple of important benefits.
- You set the foundation for a relationship with a lender that can grow over time.
- You create a credit history for your business right away.
- You secure funding which can accelerate your business’ growth.
Create a Business Credit as a Risk Management Strategy
Financing—whether loans or lines of credit—can take days or even weeks to be approved and made available to you. If you wait until you need the money to apply for a business loan or line of credit, there is a high likelihood that you won’t get the money in the time frame that you truly need it.
In a study by U.S. Bank, more than 4 out of 5 businesses reported that cash flow problems were the main reason the business failed. You can run a very profitable business and still have cash flow troubles. This is especially true if your business relies on paying suppliers for goods and inventory in order to operate.
You need a system for supplier risk mitigation you can trust. Having a credit plan in the works from the beginning gives you the agility to maneuver around such situations.
other valuable tips:
Start Small and Grow Smart
Approach building credit like building a relationship. It starts small and as it gains positive momentum can grow over time. Show your lender that you are credit worthy by paying your bill in full and on time. This will build a positive credit history for future loans and lines of credit and increase the likelihood that your lender will increase your limit.
Find out what the terms of your loan or credit line are up front, including the intervals at which they will consider increasing the amount. Approach the credit strategically. Make a plan and stick to it. This relationship can pay dividends for your business’ financial health and operational stability down the road.
Image Credit: small business credit by Pixabay
end of post … please share it!
GUIDE: about credit management
end of post idea for home improvement
view and analyze home improvement ideas at our LetsRenovate center
Helpful article? Leave us a quick comment below.
And please give this article a rating and/or share it within your social networks.
