The Single Best Benefit of Factoring

Your company’s credit profile may impact its ability to obtain a conventional bank loan. Even though there may be no negative items on the report, the company might not have enough of a credit history to satisfy the risk requirements of a traditional lender. Factoring is an alternative way to bring working capital into your company, but it can also have an impact on your credit score. Not in the way having a loan or line of credit would, but a positive impact, none the less.

Developing Your Business Credit

Small business owners must rely on their personal credit score to get their business credit going, and if your personal score isn’t very high, your business starts out on the wrong foot. Just as it is difficult to personally get a loan or credit card at a reasonable interest rate, the same problem will happen when you try to secure funding for your business. Until you have established consistency in paying the bills and not having too much credit open with your company, it could be difficult to secure a line of credit or be approved for a traditional loan.

Using Factoring for Credit Help

Before you can start to work on the company’s credit profile, you need to make sure you have a Duns number (the number used to report business credit to Dun and Bradstreet the reporting company) and a checking or savings account opened using the company name. Any credit cards, vendor or supplier accounts, or manufacturer accounts will also be reported to Dun and Bradstreet, so be sure these have the company name and Dun number on them.

Though factor services don’t get reported to the credit bureau, you can use the money received from the transactions to pay your bills on time. Rather than get behind with your own creditors while you wait on customers to pay for goods, you can keep your payment history flawless by paying each invoice ahead of time and in full. You can also use factoring to access additional cash for business-related expenses rather than extending any lines of credit you may have open. This keeps your credit history in better standing.

You need to protect your company’s credit rating if you want to open doors to new lending options in the future. You can use the extra cash from factoring for immediate needs while building your credit report for long-term benefits. This is perhaps the single best benefit of using a factor for working capital.


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