Healthy Credit Practices | Establishing Healthy Credit

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		HEALTHY BUSINESS CREDIT
What is healthy business credit? "Healthy business credit" is measures financial and management business strengths against a series of factors commonly used for making business financing decision. We have created a simplified series of factors to help gauge a company's ability to access and maintain credit. Like the physical fitness of a human being, there is not a single metric that alone determines whether an individual is designated to be healthy or ill. However, we have focused our attention on several specific factors whose measures help to gauge the stability, risk and fiscal health of a business. How can I assess my creditworthiness? The Healthy Credit Practices program is designed to help you to do just that. By examining factors which lead to healthy business credit, you can gauge your company's creditworthiness against what we call your "Pillars of Performance "to find our where you stand. If you need assistance, contact our Credit Assistance Center for help Consider contacting the HCP Credit Assistance Center for credit barrier analysis or for personalized services or training to gauge where you stand. In the meanwhile, feel free to explore our other Business Credit Tools, or contact us office for a free business credit analysis. How can I improve my creditworthiness? Improving the overall creditworthiness of your company will most likely include both personal and business considerations. Start by increasing your understanding of how business credit is evaluated. Order a copy of The Healthy Credit Practices Guidebook, The HCP Workbook or attend a Healthy Credit Seminar click here. Use these and other Healthy Credit Tools to gauge the state of your credit readiness, identify any obstacles and develop a Healthy Credit Plan for your company. Where can I find business credit assistance? Many non-profit assistance organizations offer business technical and credit assistance services. But be warned. Not all agencies are trained in methods to help a business improve their creditworthiness. Ask your local non-profit provider whether they specialize in loan packaging or if they actually have experience in helping company's to develop a longer-term business creditworthiness plan. Visit our Credit Assistance & Training Center for assistance.
		BUILDING A SOLID CREDIT FOUNDATION
The 8 Pillars of Performance Think of the Pillars of Performance as “signs of stability” that support the foundation of creditworthiness. Each of the Pillars of Performance below, are important factors used by the financial services community to judge the creditworthiness of your business. Pillar #1 - Revenue Stability: Consistency vs. Current Sales Company’s sales history is often more important than its current contracts. Revenue stability demonstrates the consistency that enhances a lender’s confidence in the company’s ability to generate future revenue flows. Pillar #2 - The Importance of Cost Controls Businesses with wide cost fluctuations are viewed as high risk and thus face a steeper climb toward creditworthiness. Maintaining strong cost controls and systems to monitor margins and fluctuations can reduce these risks. Managing the costs of business requires ongoing analysis of financial metrics. Pillar #3 - Positive Credit Behaviors Financial Institutions examine both the owners' personal and business credit behavior patterns. These behavior patterns can give insight into the fiscal habits of the company's management. Some items evaluated include, management of bank accounts, timeliness of personal and trade credit payments, adherence and debt management. Pillar #4 - Management Capabilities Sound Management is one of the most important elements of a business. Lenders' believe that management capability is demonstrated through its ability to balance risk, growth, financial resources, and customer care, while maximizing both material and human resources in the most efficient manner possible to operate the business. Pillar #5 - Strong Fiscal Management Lenders' favor company's who are committed to developing a qualified financial team to routinely monitor performance keep a close eye on the company's financial position and help prepare it to meet future demands. Pillar #6 - Reliable Financial Systems A company's financial systems must produce timely and accurate financial reports so its managers can monitor business activity. Solid financial systems produce sales, billing, accounts payable, purchasing, payroll, project and accounting reports. Run reports daily, weekly, and/or monthly to best forecast and respond to business needs. Pillar #7 - Consistent Profitability A true picture of financial stability is the company's ability to consistently generate profits. Profitable companies with two to three years of consistent revenues, costs and profitability are viewed as predictable and thus less risky. Pillar #8 - Personal or Business Asset Base earnings from ongoing profits. A business either retains earnings in the company (retained earnings), or disburses its profit to its owner(s). Whichever the choice, either a company or its owners' assets increase over time from excess profits demonstrates increased creditworthiness. You may experience varying levels of success in reaching certain pillars on you building the solid foundation that cumulatively helps build a strong business profile. Understanding and working toward these 8 Pillars of Performance will start you on your journey toward building a creditworthy business for the long-term. Use our Healthy Credit Program Tools to track your Pillars of Performance prove your business credit for the long-term.

		THE IMPORTANCE OF ESTABLISHING BUSINESS CREDIT
Distinguishing Personal Credit from Business Credit Although business and personal credit are intended to be used for different purposes, many small business owners co-mingle debt, thus blurring the line between their business and personal financing. Financiers rely upon many sources of data to guide them in the credit decision process. Because most small business owners have final authority to determine the use and disbursement of business resources, and frequently co-mingle personal and business assets, some types of credit granters also use personal credit information when considering small business credit decisions. Without an established strong business credit profile, the creditworthiness of your business will most likely always be judged by your personal credit profile.
		ESTABLISHING BUSINESS CREDIT
Every business has the ability to build their business credit profile, which sets the foundation for the business enterprise to become an independent entity with its own credit standing. Establishing healthy business does not happen by accident. It all starts with a plan. Having healthy business credit can help you save much needed funds to operate or grow your business. a healthy business credit profile can also eliminate the need for you, as the business owner to use personal credit cards or borrow from friends to finance your company's needs. Establishing and maintaining a healthy business credit profile can: Open up avenues to future revenue opportunities Separate you from your business Lower your tax liability Protect your personal assets Help you keep more of what you make Improve your access to trade credit from suppliers Lower your insurance costs Establish a track record for future growth Build a strong financial foundation for future credit Start building a business credit profile, with some of these simple steps: Keep your business license current Obtain a Tax ID number for your business from the IRS Establish/maintain a separate business bank account Incorporate your business and keep your business filing information up-to-date with your Secretary of State. Get a Dun and Bradstreet number for your business Separate your personal credit from your business List your business in the phonebook Establish a web-presence for your business Open and maintain at least two business credit accounts Pay your business debts on-time, or earlier always Prepare a Healthy Credit Plan for Your Business
		ESTABLISHING BUSINESS CREDIT
Like in the world of consumer credit, there are credit bureaus that compile credit information about small businesses. business credit reports contain information on a particular business' payment history, existing credit obligations, previous or existing legal filings, and background history. This information is often used as an indicator of a company's "financial health," and helps lender determine risk level. The two major business credit reporting agencies are Experian and Dun and Bradstreet. Dun and Bradstreet (D&B) - Dun and Bradstreet is the largest credit reporting institution in America when it comes to small business information. Over 70 million businesses are registered with D & B. Learn how to establish a high Paydex score at D&B or prepare your Healthy Credit Plan now. Experian Business - Experian collects credit information from thousands of businesses nationwide, typically from suppliers or lenders a company does business with, county records, or from courts. Experian uses an Intelliscore rating between 0 to 100.