Could This Be Preventing Your Business Credit from Improving?
Building a strong business credit history is essential for obtaining financing that helps you manage and grow your business. We’ve talked about several ways to build and maintain business credit in the past, but here we highlight the sneaky thing that may be hindering improvement from happening at all. Without your knowing it, the type of lender you have may keep your credit score where it is or lower.
Let’s say you do everything right to develop your business credit. Let’s say you take out a loan, make the payment in full at every due date, and pay all of your other bills on time too. You shouldn’t have any problem boosting your business credit, right? Unfortunately no, it’s not that simple.
You may (likely) find that your financing doesn’t show up on your business credit history. Experian found that over 98% of lenders don’t report to their customers’ credit history, which means there’s less than a 2% chance your business credit reflects loan payments (and less than a 2% chance that those payments are helping build your business credit).
Why is this?
As it turns out, your credit history has a lot to do with the very recent history of the business financing industry. You may remember that 2007-2008 was a tough season for businesses worldwide. It seemed like every industry was striking out, even on their home fields. You may also remember that alternative financing stepped up to the plate and became a popular option for businesses to gain easier access to funding.
Yet no lender at the time, alternative or otherwise, was exempt from feeling the pinch of hard times, and many sought ways to cut costs. One way included not reporting loan payments to customers’ business credit, because reporting each payment costs money.
Although eight years have passed since the Recession, many lenders still choose not to report to customers’ business credit, unless there’s something negative to report.
While it’s important to utilize the benefits of financing, we strongly urge every client to understand the terms of their financing. For financing that’s transparent and cost-effective in its nature, we would love the opportunity to earn to do business with you.
A dedicated Client Advocate works alongside you to learn your business, your industry, and your unique needs. Click, text, or call to get started today.