November 18th, 2009 by Alex Coté
The small business credit crunch has justifiably been one of the primary news themes during the recession and slow recovery. And while stingy, risk-adverse credit behavior from banks and lenders is often labeled as the primary culprit, some small business owners may actually be exacerbating the credit crunch, albeit more due to ignorance than intentionally bad habits. Cortera, a community based business credit bureau, publishes a monthly index on small business credit behavior – trends on A/R and payment activities – and the data continues to show that small businesses have become increasingly delinquent in paying bills in a timely manner. You could say such behavior is a result of dwindling cash due to less access to credit, but it’s also a result of well intentioned efforts to extend working capital by holding cash as long as possible. Unfortunately, such behavior is hurting their credit viability, making it even harder to secure loans and credit lines. So just how can businesses maximize the limited capital they have while improving their credit rating? Here are three simple tips:
Obviously these are only three of many best practices. Have other ideas or tips? We’d love to hear from you.