Healthy Credit Practices℠ | How Business Credit Works

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UNDERSTANDING BUSINESS CREDIT BASICS

A key ingredient in the development of any small business is gaining and keeping access to business credit. Entrepreneurs need capital to start, expand and maintain smooth business operations.

Healthy Business Credit. Developing and maintaining healthy business credit can help a small business survive difficult times and thrive during peak periods of growth.

What is healthy business credit?
How can I assess my creditworthiness?
How can I improve my creditworthiness?
Where can I find credit assistance?

The Relationship between Risk and Healthy Business Credit. Understanding risk is the first step in understanding creditworthiness. Credit risk is the term used by lenders to define its perception of the likelihood that a loan will be repaid. The higher a lender’s perception that a borrower will be unable to repay the loan, the higher its’ risk profile.

BUILDING A SOLID CREDIT FOUNDATION

Business Creditworthiness can be developed over time as your company grows, but this is not always the case. Lenders use a variety of factors to evaluate risk. Because credit granters establish their own formulas for credit approval, the exact criteria used by individual banks, financiers, credit card companies or suppliers will vary.

Understanding the factors used to assess creditworthiness can help you better manage your risk profile and improve your ability to get credit when you need it.

Knowing this, The Healthy Credit Practices℠ Program focuses on the most common factors the affect business credit decisions.

We call these The 8 Pillars of Performance. Improving performance in each of these areas can demonstrate improved signs of stability, a lower risk profile and strengthen your company's credit foundation.

		THE ROLE OF BUSINESS CREDIT vs. PERSONAL CREDIT
Both business and personal factors play a role in the ability to build and maintain business credit. This is because lenders often use both business and personal credit evaluation factors in the risk analysis used in most commercial lending processes. Therefore, the way that personal credit is managed can impact your company's ability to get access to and maintain business capital. Both personal and business credit factors need to be considered and managed as part of your Healthy Credit Plan. Learn more about the factors affecting Business vs Personal Credit
		HEALTHY CREDIT TIPS
Business Credit Tip #1 Prepare a credit use chart. Take time to prepare a detailed Credit Use Chart before applying for business credit. The chart should include the amount of funding required along with a list the items needed, the cost of each item, the anticipated source of repayment and the length of time needed to repay the funds. If you are not sure what type you need, use our Credit Match Tool to learn more about the different types of business credit and find the type that's right for you. Personal Credit Tip #1 Review Your Personal Credit Report at Least Annually. Use your birthday as an annual date reminder to review your personal credit report each year. Your personal credit profile can play an important role when you decide to apply for any type of credit, whether for personal or business purposes. It is a good idea to know exactly what is shown on each of your credit reports long before applying for a loan.