Maintaining good business credit history is crucial for business success. A lot depends on how you use your business credit. If you know the tactics, you may win the game gradually. However, if you fail short of techniques, you may have to face a cash crunch. That’s extreme and avoidable. Like your commercial CIBIL report, your business credit report matters a lot too.
It contains vital information about your company, including your payment history, credit history, tax liens, etc. If you can maintain an impactful credit report, you’re likely to enjoy financial stability in the long run. Talking about its benefits to MSME, it boosts your borrowing power, and you enjoy market stability.
Let’s talk about the five factors that impact your business credit.
Credit history
As said earlier, if you’re able to maintain a good business credit history, you can reap benefits in the future. Your business credit gets impacted if you don’t take care of your credit or misuse it. For example, if you have taken credit a few times and paid EMIs on time, your credit history will not be negatively impacted. However, if you take credit and delay payments, it can impact your business credit history. So, if you’re planning to take credit, make sure you have a plan to repay the amount on time.
Payment history
As a passionate business owner, you don’t want to be included in the payment defaulter list. That’s why you should use your business credit wisely. It reflects your payment habits. Your payment history can explain it all to your lenders and investors. If you don’t pay your dues on time or your clients don’t pay you on time, it can impact your business credit. You may not get credit the next time easily. Therefore, it’s important to keep a check on your payment history.
Credit history length
Paying your dues on time is one thing, but how long is your credit duration matters a lot to potential lenders and investors. If you have got a habit of taking credit now and then, you may need to think it through. Taking credit for the long term is fine, provided that you don’t default on payments.
New credit
In addition to the previous point, it’s relevant to talk about availing of new credit. Your application for new credit is collected by credit bureau agencies to prepare your business credit report. It can impact your business credit history in both ways, positively and negatively. That’s why you should take credit only if you need it.
Outstanding amount
If you find yourself under debt after taking unnecessary credit, it’s time that you take action. Your business credit may get impacted. The overdue amount will keep increasing unless you increase sales or find ways to repay it. How does it hamper your market reputation? You may find it difficult to approve your next credit. Your borrowing power is impacted. You may not receive positive reviews about your business from your clients.
All in all, the crux is to keep moving forward in business. If you think your business credit is impacted, take stern measures to get things on the right track.
