4 Habits to Get Your Business Approved for More Financing
Bigger, better, quicker. That’s the kind of small business funding you want. However, you don’t get access to that kind of financing by just hanging up your “Open for Business” sign. It takes time, and it takes work. The financial habits you practice today will decide the loans you qualify for tomorrow. Beyond financing, healthy financial habits set you and your business up for success. Lack of capital is the No. 2 cause of small business death , and that doesn’t just mean failure to raise funding. It entails mismanaging cash flow, overlooking financial needs and securing unsuitable financing. With the right habits, you can capture the capital you need and avoid the financial failure you fear. It’ll take some effort and hard decisions, but the following financial habits will get your business on track for better, faster financing.
1. Monitor Your Business Credit Score
First of all, does your company even have a credit score ? If you’ve opened a business credit card or taken out a business loan, then yes. Like a personal credit score, your business credit score is a measure of your creditworthiness. But unlike your personal credit, your business score is available to the public. Yep, that means lenders, vendors, and even customers can take a peek at your reliability. Scary, right? Well, it doesn’t have to be. Years in business, credit lines, payment history, punctuality — these indicators are all critical to your credit score, and they’re all factors you can actually control. The earlier you start monitoring your business credit, the sooner you’ll build a strong credit history to help your business secure more financing. Related: How Does My Personal Credit Affect My Business?
2. Control Your Cash Flow
To get approved for more financing, you're going to need to take the reins on the ins and outs of your current capital. Poor cash flow leads to late payments and damaged credit, which can lead to a host of other business challenges. Fortunately, you can take simple steps now to take control of your cash flow. First, you need to start monitoring your cash flow regularly — not just when you're closing the books at the end of the month. Bookkeeping software like Sunrise helps you track your payables and receivables, making sure you keep a positive balance. These insights empower you to identify waste and opportunities to maximize every dollar. If your clients are inconsistent with their payments and impacting your working capital, you'll struggle to maintain positive cash flow. While you're trying to build your healthy financial habits, make it a point to work with other trustworthy clients. Just like lenders and vendors do with you, check your client company’s credit score to ensure they're reliable. By taking control of your cash flow, you'll be better positioned to execute on habit No. 3.
3. Maintain a Strong Credit History
Keeping up with your payments is vital to building your credit. Lenders want to know they’ll get paid in full and on time — there’s no stronger indicator of your creditworthiness. With positive cash flow, you’ll be ready to stay up-to-date with your payments, but there are more tools you can leverage:
- Use auto-pay: Whenever possible, set your recurring bills to deduct the funds from your bank account automatically.
- Set reminders: If auto-pay isn't available, use a calendar, simple phone reminders or software to remind you when the bills are due.
- Schedule time for finances: Set a consistent time every month to sit down and manage your finances. Strive to get your customers' payment cycles in sync with your own to ensure there's money in your account to pay the bills.
Regardless of your clients' creditworthiness, it’s impossible to predict every business surprise. Disaster, seasonal lulls, economic downturn — tragedy can strike at any moment. With a business line of credit , you'll have a flexible safety net ready for any situation. So no matter what happens, you'll have the cash flow necessary to protect your credit history. Plus, securing a line of credit early on can help you build your credit history to acquire bigger, better loans down the road.
4. Be Intentional with Your Loans
Lastly, use loans carefully. Debt isn't a bad thing if managed well, but you need to be responsible about the financing you take on so you can still manage your cash flow. Yes, lenders want to see you have the ability to take on debt while staying on top of your payments, but they also want to see you're careful and methodical about the financing you secure. Examine your options and make sure you get the right loan for the right situation. Adopt these financial habits now to increase the likelihood of better financing options in the future. With a solid business credit score, you'll qualify for more financing and be able to negotiate larger loans, lower interest rates and better terms. In the world of small business loans, it doesn't get much better than that. Related: 5 Creative Ways to Fund Your Startup Without Investors More From Seek
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