Bad Business Credit Attitudes can Cost you

Many business owners are under the impression that, because they run small operations, they needn't be particularly concerned about their credit profile, whether personal or professional. Nothing could be further from the truth. Such misguided thinking can, in fact, cost you a considerable amount of money, not to mention your company's name and reputation. Here are a few notions that should have absolutely no place in your business philosophies:

As a small operation I only deal with customers and other small businesses, not with big banks or suppliers. My customers don't care about my credit, so it's irrelevant.

That's incorrect. Just because you deal face-to-face only with other small businesses doesn't mean that there isn't a big lender in the picture somewhere. The credit that your small supplier grants you – or the loan you received from your small local lender – could be backed up by and run through the credit microscope of a large lending institution. And if you don't care about your business or personal credit profile, chances are that they won't care very much for it, either.

I don't worry about checking for changes in my business credit file because changes in it are rare.

This attitude, too, is a recipe for future trouble. The fact is that every business decision or transaction you make could have an impact on what your suppliers, customers, and business partners see about your operation. Not only are major transactions (making mortgage or lease payments and paying vendors, for example) reported to the credit bureaus, smaller and seemingly less important items may also be recorded, such as advertising, underwriting insurance, equipment leases, and the like. Such changes may occur regularly, and they have the ability to affect your business's cash flow and reputation.

My business is very small (or new); there's no need to monitor my credit file.

On the contrary; these are reasons that you should monitor your profile. As your organization grows and begins to establish relationships with suppliers, service providers, insurance companies, and banks, you'll want them to see you in the most favorable light (and terms) as possible. Many, if not all, of these entities will supply the credit bureaus will ongoing information about your business and how it's conducted. For instance, suppliers, service providers, and landlords will report their experiences about how you've paid your loans, invoices, and leases. Business directories may supply information based on advertising that you've done. And demographic information will be given by telephone and communications companies. With such data being passed along about your company, it's prudent to ensure that you develop and maintain a strong credit history and that you regularly monitor your files for accuracy. These actions will only help to facilitate the growth and success of your business.

Because of the small size of my company, my business credit file has no bearing on its cash flow.

Wrong, again. Many prospective business partners examine your credit file before entering into any dealings with you – whether or not they'll actually be extending credit to you. The terms, limits, and rates that you receive from suppliers, service providers, banks, and insurance companies will all impact upon your company's bottom line. Therefore, keep a watchful eye on your profile; favorable rates and terms will have the effect of boosting your cash flow.