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Three Common Credit Mistakes To Avoid When You Are A New Business Owner

By Author: Stephen Perl
Total Articles: 3

Starting a business needs lots of homework to be done and as an owner, you might face many unknowns in the initial phase. It is good to learn from others experience and mistakes, but remember in back of your mind that no two businesses are same even if they are in same industry.

To meet funding requirements, a startup needs to have good credit score and building this might drain away lots of effort. We have a solution!

We have sorted out 3 common mistakes, if committed in initial phase can hamper your creditworthiness. Take note of these to ensure you do not commit the same.

Not Making timely Payments

Just as you would do to maintain your personal credit, you need to make payments to your vendors on time. A bad payment history will negatively affect your business’s credit score. Yes, it is difficult to arrange funds on time to pay your vendors, you can use your unpaid invoices to get advances and clear your bills. Invoice factoring is a great way to source funds into your system to meet all your operational needs.

By using business receivable factoring you can get up to 80% on average of the invoice amount as advance and the balance is paid to you by invoice factoring company once your client releases the outstanding. Choose a/r factoring to pay your vendors, clear your bills, procure raw materials and inventories, funding working capital, meeting payroll expenses and much more. In short, instead of stretching you payments, clear them by resorting to a flexible source like accounts receivable funding.

Banking on your personal Credit

Getting in funds by personal loans or souring from credit cards is a big no as it will eventually affect your business’s credit. Not only your business will be nowhere in such case, your credit score can go down in no time if your business fails. Keeping business and personal accounts different could be beneficial for both you and business.

Over-Borrowing

With initial success and good sales, you can get carried away to invest more and expand your business, but this will overburden your accounts in long-run. As you pile on more debts, overborrowing hampers your credit score. Instead, by choosing accounts receivable financing you get in funds without adding debts and this source will accommodate all your growing funding needs.
It is the initial days that build the credit of a business. A small mistake can be disastrous.

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