If you want your business to succeed, then building and maintaining good business credit is crucial. Clients may not pay for services, or equipment may break, putting more of a financial burden on you. It’s frustrating, but it’s the reality of owning a business. To move on, you may want to repair your business credit, but this is different from repairing your personal credit.
Business debt can be discouraging and burdensome. One way to reduce the struggle is to contact a debt attorney. They can help you with your finances and negotiate your business debts. Below are six additional ways you can repair your business credit in 2021.
1. Talk to Your Creditors
If you’re in debt, you may be scared to contact your creditors. This is understandable, but in reality, it may help your bottom line. They might adjust payment terms, suspend accounts, or offer settlements to help recoup some of the funds. If you take the initiative and make a good faith effort to repay your loans, creditors are more likely to work with you.
2. Pay Your Bills on Time
While this may sound obvious, it’s important to remember. Past-due payments can negatively impact your business credit scores and relationships with vendors. Set up recurring payments through your bank account or create a monthly calendar event to ensure you make payments on time.
3. Work with Past-Due Accounts
If you have vendors you still owe money to, establish a repayment plan. While they may have you pay more in interest, paying off past-due debt will ease your financial burden. It’s not a guarantee, but you may even be able to remove a negative mark on your business credit report.
4. Open Accounts, But Don’t Close Any
All small business owners should have at least one or two credit accounts. Open the accounts you need and set up automatic payments. You may be tempted to close unnecessary accounts, but this might not boost your business credit score—in some cases, it may actually lower it. Having a few credit options raises your debt availability, which ultimately boosts your business credit score.
5. Separate Business and Personal Finances
It’s essential to keep your business and personal finances separate. If you use business items for personal use, you can no longer deduct them as a business expense. By not keeping your finances separate, you risk the IRS auditing you and your business. Separating finances will also make it easier for you to keep records and analyze budgets more easily.
Likewise, if you use your Social Security number instead of your employee identification number, you risk severe impacts. For example, if you run into issues with your finances, you risk your business. Similarly, if your business is slow, then you risk your personal finances.
6. Lower Your Revolving Credit Debt
You most likely know that your credit score is determined by how much debt you have. But what some people may not realize is that your credit utilization also determines credit scores. In other words, creditors look at how much credit you have available and how much you use.
For instance, if you have a $50,000 credit card and use $25,000, you used half of the available credit, which will likely hurt your credit score. When reducing your debt, you want your credit utilization to be under 30%.
Repair Your Business Credit with Help from a Debt Attorney
If you’re in debt because of your small business, there’s never a bad time to turn things around. One thing to always avoid is declaring bankruptcy, which destroys your credit and makes loans harder to obtain in the future.
Don’t let debt destroy your business or your future. Instead, let the lawyers at McCarthy Law guide you through the debt settlement process. We’ll take the pressure off of you so you can get back to running your company.
Call (855) 976-5777 or complete an online contact form to schedule a free consultation