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Top Reasons Why Small Business Owners Should Manage Business Credit |
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Written by Dunn & Bradstreet
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 | | business management |
Single-most Important Benefit of Managing Credit: Better Cash Flow
1. For Better Financing: Good credit can ensure that entrepreneurs and small business owners get financing when they need it. Most loan decisions below $100K are automated, so in those instances, decisions may be made based solely on data that is in a small business’ credit file. For businesses with poor credit ratings, top national banks increase credit card interest rates on average from 9 percent to 18 percent, and loan interest rates on average from 8 percent to 12 percent.
2. For Supply Management: Suppliers check businesses out without their knowing it; perhaps a $30K credit line could have been $60K with a stronger business credit file. A positive business credit file can ensure that business owners get the supplies they need to meet customer demand under the best terms and level of service. 3. Better Credit Decisions: Businesses need to know the credit standing of their customers to make sure they are extending the right amount of credit, at the right terms, to companies who pay their bills on time. Knowing the credit of customers allows small businesses to make better decisions and protect their bottom line. 4. For Fraud Protection: Actively managing your credit file ensures that wrong information doesn’t come into your business credit file due to fraud or errors. Fully 15 to 30 percent of all commercial credit losses are due to fraudulent activity. Many companies who have good credit may still get turned down for loans or not get the best rates. 5. Bottom Line — It’s All About Cash Flow: All the above mentioned reasons can be summed up in one, single-most important benefit of managing credit: Better Cash Flow. Small business owners and entrepreneurs consistently agree that cash management is one of their very top concerns and actively managing both their own business credit file and the credit of their suppliers and customers can go a long way in taking care of this concern. HBM
Previously published in the February 2007 issue of HOME BUSINESS® Magazine, an international publication for the growing and dynamic home-based market. Available on newsstands, in bookstores and chain stores, and via subscriptions ($15.00 for 1 year, six issues). Visit www.homebusinessmag.com
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