Why your credit score is good for the health of your fitness business
An excellent business credit score can accelerate the growth of your small business by making it easier to secure credit and attract investors. Furthermore, a great credit score reduces the cost of borrowing and can help you to secure more flexible terms from credit providers, thus protecting the financial health of your business and creating greater scope for investment.
So how do you build an excellent business credit score? There are steps you can take to put your business in the best possible position for borrowing in the future. Let’s dive in.
1. Register with Credit Bureaus
Credit bureaus collect and organise credit information to create a report to help lenders come to a decision. You should register with the major credit bureaus as soon as possible to understand your credit score and discover which lending options may be available to you. The major credit bureaus are:
2. Check Your Score Regularly
It pays to keep a close eye on your business credit score. Checking your score regularly will allow you to quickly spot any problems and rectify them before they do real damage to the financial health of your business. It’s a good idea to sign up for alerts to notify you of any changes to your credit score so that you’re always one step ahead.
3. Separate Your Business and Personal Finances
It’s a huge mistake to mix your business and personal accounts, for a number of reasons. First of all, it makes it incredibly difficult and time-consuming to file a tax return and leaves you liable to costly mistakes. Furthermore, any dips in your credit score will then prove doubly damaging. Maintaining separate business and personal accounts makes it far easier to manage your finances and helps you to present a stronger case to potential investors or creditors.
In order to keep your business and personal finances separate, set up a business bank account and apply for a business credit card as soon as possible. This will allow you to maintain clear and accurate records from the start, thus demonstrating financial responsibility and professionalism.
4. Maintain Good Personal Credit
Credit providers often take a business owner’s personal credit score into consideration when deciding whether to lend or not. Messy personal finances are a huge red flag to potential lenders. If you can’t handle your personal finances well it’s unlikely that you’ll fare much better in business. Here are a few simple ways to build an excellent personal credit score:
Pay your bills on time
Keep a close eye on direct debits
Ensure you always have a cash reserve for unforeseen costs
Use your credit card like a debit card and pay off the balance immediately after making a purchase. This helps to build an excellent credit score without running the risk of accumulating debt.
5. Talk to Your Vendors
It’s worth asking your vendors whether or not they report payment performance to the major credit bureaus. If they do, you can use this to your advantage to build a stellar credit score. Paying these vendors on time, or ideally early, is a fantastic way to boost those numbers. This signals to credit providers that you’re financially responsible and can be relied upon to make timely repayments.
Hard Work Pays Off
Building an excellent credit score takes time and hard work, which is why you should start to implement the above steps right now. A stellar credit score will help to rapidly accelerate the growth of your business in the future, but you have to put in the groundwork today.
They say it takes years to build a reputation and just minutes to destroy it. The same is true for your credit score. Once you build a great score, don’t rest on your laurels and assume that all the hard work is done. You must make a concentrated effort to maintain this credit store and continue to be financially responsible because the rewards are definitely worth it.
1. Book a call with me: https://southbourneaccountancy.co.uk/contact-us/
2. Download my free guide on “7 mistakes to avoid – to stop your fitness business running out of cash” https://southbourneaccountancy.co.uk/fitness-ebook/
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4. Book an R&D eligibity call: https://calendly.com/rdteam/15min?month=2020-11
5. Grab a copy of our “32 ways to extract value from your business” – tax savings. Here https://southbourneaccountancy.hubspotpagebuilder.com/32-ways-checklist-to-extract-value-from-your-business-save-tax-now