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The importance of business credit monitoring: Staying ahead of the curve

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Business credit monitoring is a practice that should be adopted by any business seeking to establish or improve its business credit.

What you need to know

  • Be sure to register your business with the major business credit reporting bureaus.
  • Monitor your business credit to detect and remove errors from your report.
  • By staying on top of your business credit report, you’ll be ready to take advantage of credit and growth opportunities.

Understanding business credit reports

There are three major business credit reporting bureaus. They are Dun & Bradstreet, Experian Business, and Equifax Business. These aren’t the only entities tracking credit profiles for small businesses, but they are the largest. You can begin your creditworthiness assessment by registering with each of them:

Once registered, you can review the credit monitoring solutions each reporting bureau offers, such as email and text alerts for credit inquiries, late payments, and defaults. You can also see your business credit score, measured on a scale of 0 to 100. Credit score tracking is a key variable in business credit monitoring, so it’s good to understand how it’s calculated.   

Your next step is to review your business credit report by reading the individual sections of it carefully. The “summary” gives you an overview, while more granular details are in the “account payment history” section. Review those and check for any derogatory information. You can also check the “UCC filings” section to see if your assets have been pledged as collateral.

Business credit score monitoring is not the same as personal credit score monitoring. The variables, scales, and objectives are different. Your main concern as a small business owner is credit risk prevention, which requires regular credit score and credit report monitoring. Establish a review schedule to ensure your business credit rating is good.    

Identifying the benefits of business credit monitoring

Early detection of errors or inaccuracies in credit reports is one of the biggest benefits of business credit management. Another is the credit profile oversight you get by accessing all three business credit reports. You can self-check your credit before a lender or credit card company does if you’re applying for a small business loan or business credit card.

Aside from assessing creditworthiness and financial stability, credit monitoring can also help you detect theft or fraud. Entries on the credit report can show accounts you didn’t authorize, unpaid debt accounts that should have been paid, and liens placed on your business that shouldn’t be there. Those issues can all be corrected if you know about them.

If you majored in business, credit profile management may have been mentioned once or twice in class. Sadly, it’s not a topic that’s discussed often in academic circles. In the real business world, it can be critical to your success.

Proactive risk management

As referenced above, you need a credit check to qualify for a business loan. Credit risk management can help you identify areas of concern—like a pattern of late payments or cash flow challenges—and tell you where you need to make changes. Think of this as another tool to help you manage inflows and outflows more effectively.

Knowing what’s happening on your credit report can help you predict changes to your business credit score and credit rating. For example, taking on new debt will make a new account appear on your credit report, potentially lowering your credit score. Carrying too much debt could also downgrade your credit rating. Understanding how your credit report works can help you prevent that.      

One element of financial risk monitoring to be vigilant about is checking the number of hard credit checks done on your company monthly. Hard checks don’t happen until an application for new credit is submitted and a soft credit check has already been done. If you’re not generating those checks, find out who is—it could be an act of fraud.

Leveraging opportunities for growth

Incorporating credit report analysis as a regular function of your accounting department can also reveal or create growth opportunities. Companies with good credit can borrow the funds to launch new product lines or finance an expansion. They also typically have the bandwidth to negotiate better terms with suppliers and vendors.

Whether you choose to grow via new client acquisition or online expansion, make sure you know what the cost of that growth is versus the average lifetime value of the customers you acquire. If the calculation looks good, figure out how much you need to borrow to reach your goals—then make sure your credit score would allow for you to borrow that amount.

Business credit monitoring is important for several reasons. Your business credit score is an indicator of your creditworthiness. Your business credit report breaks down how that score was calculated. Learn how to read your report to see where you need improvement, then follow up with proactive credit management. It could be the key to growth for your company.    

A good credit rating is essential for staying ahead in this competitive business landscape. Lenders and finance companies have had more stringent criteria during the pandemic recovery period that we’re still in. Businesses with good credit can meet those standards, while others may not be able to. Check your credit report today to see where you stand.

See how a Bluevine Line of Credit can help your business grow.

Disclaimer

This content is for educational purposes only and should not be construed as professional advice of any type, such as financial, legal, tax, or accounting advice. This content does not necessarily state or reflect the views of Bluevine or its partners. Please consult with an expert if you need specific advice for your business. For information about Bluevine products and services, please visit the Bluevine FAQ page.

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Disclaimer

This content is for educational purposes only and should not be construed as professional advice of any type, such as financial, legal, tax, or accounting advice. This content does not necessarily state or reflect the views of Bluevine or its partners. Please consult with an expert if you need specific advice for your business. For information about Bluevine products and services, please visit the Bluevine FAQ page.

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