Declining Markets-Good Credit Score….Irony of Doing Business
In these uncertain times where there is a complete stagnation of business growth and slowdown of payments, managing credit worthiness by Small Business owners is a difficult ORDEAL. Make sure you aren’t labeled a ‘bad credit’. You can do this by maintaining a good credit score. It’s simple…….. make timely payments of credit accounts that are regularly reported to credit bureaus, settle open derogatory listings and start making payments on other credit lines inorder to reprove credit worthiness.
The good question is “Where is the money?”. Now before you go around looking for the ‘money‘ bear in mind what the credit bureaus are looking for while scoring your credit accounts:
Payment history weighs heavily in your credit score. Consistently paying your installments on time has a positive influence on the score. Collection accounts and bankruptcy filings are also taken into consideration when analyzing your payment history.
Total debt vis-a-vis total available credit. If your credit limits are maxed out, you will be considered a poor credit risk, because it appears that you are struggling to pay off the debt you have already incurred.
Length of positive credit history, where the longer you maintain accounts in good standing, the better your score will be.
Mix of types of credit and its maturity period has an impact on the credit scores.
The number of new credit applications recently completed has a bearing on the credit score. Applying for too much new credit in a short time period makes indicates that you could be credit risk, as you may be desperately trying to keep your head above water.
Additionally your neighbourhood friendly banker (who has now turned horrific!!) looks for Corporate Intelligence on your business. He is making sure that your current performance will not affect your future repayment capacity. Businesses with negative credit listings, such as delinquent accounts, must establish new positive credit lines to try to counterbalance the negative impact of their delinquent items.
Now the most important question of all “Where is the money?”. Well there are various sources for revenue generation. If you happen to be in the US and are part of the erstwhile blue chip corporations…having gone bust, then you have the US treasury that will infuse billions of tax payer’s money. If you happen to be in India and are part of the farmer community, then the government would show its largesse and waive your loans or if you happen to be the global flag bearer of any industry (Corporate Fraud or Financial misstatements not withstanding) you will be provided assistance to keep your business afloat.
Any other category, sorry….you need to brave it all by yourself. You chose to be an entrepreneurship over being a worker or a farmer. You are heavily outnumbered in the populist scheme of things.
Vivek Parti, CEO, India Business Database.com, Risk Management and Forensic Company
