THINGS TO KNOW ABOUT CREDIT
AND CASH MANAGEMENT FOR YOUR
SMALL BUSINESS
The health and viability of your small business is, in part, based on your ability
to have positive and reliable cash ow. This allows you to meet your nancial
obligations and operate successfully. One key measurement of the health of
your business is your business credit score.
Here is a fact you may not know: If you are sole proprietor of your business,
banks and other lenders could assume a close link between your personal
credit and your business credit. And it’s possible that you have excellent
personal/consumer credit, but your business credit score may not be in the
same condition. Or the reverse.
Let’s review information about credit, credit scores and cash management for
your small business, and changes you could make in challenging times.
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Personal credit scores and business credit
scores are calculated dierently.
There are many bureaus and sources that
business lenders may access for business
credit scores.
The most popular business credit scores utilized
by business lenders are:
• Dun & Bradstreet (PAYDEX Score)
• Experian Business (Intelliscore Plus™)
• Equifax (Business Credit Report)
• FICO (LiquidCredit™ Small Business Scoring
Service)
Business credit bureaus collect information
and data from multiple sources to create a
business credit report for small businesses.
According to the Small Business Administration
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these include:
• Data Furnishers (vendors, creditors,
other companies, etc.)
• Public Records (liens, judgments, bankruptcies,
incorporations, etc.)
• UCC Filings (a legal notice a lender les with the
secretary of state when they have a security
interest against one of your assets)
• State, county, and local business registrations
• Corporate nancial reports/annual reports
• Federal government contracts, grants and loans
• Internet data mining
• Press releases and media stories
• Print directories
• Self-reported data
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Personal credit score
(via major credit bureaus)
Business credit score
(via major credit bureaus)
Range from 300-850 Range from 0-100
An excellent personal
credit score is typically
above 750
An excellent business
credit score is typically
above 75
You can access your
consumer credit score for
free, once annually.
You have no legal right
to a free annual copy of
your business credit report
– most business credit
reporting agencies
will charge you a fee.
However, you can request
a copy of your report
within 90 days if a lender
has turned you down.
Credit bureaus can sell
your credit information
even if you have not
initiated a credit
transaction, if it’s used
for a rm oer of credit
(like a preapproval).
However, you can opt out
of this practice, known
as pre-screening, at
OptOutPrescreen.com.
Business credit bureaus
can legally sell your
information.
Consumer credit reports
are private.
Business credit reports
are not private.
Here are some similarities and dierences.
Monitor your business credit rating and
potentially impact your scores by taking
some simple, practical steps.
There are many things you can do to help maintain your
score, or improve a score that is less than optimal.
• Review your current credit report. If there are any
mistakes on your report, address them right away.
If the lender refuses to correct the error, you can le
a dispute with the credit bureau. The lender will
then have 30 days to verify the information, or it
will be removed.
• Ensure your vendors are reporting your
payments to the bureaus. Vendors are not required
to report trade credit transactions, and many do not.
If you have a positive relationship with a vendor,
consider asking them to contact Experian or D&B.
The more vendors that report a positive credit history
with you, the higher your rating could be.
• If you have a positive history with a business
credit account, don’t close the account.
Closing accounts will likely not help repair your
business credit score—in fact, it could do damage.
If you have a business credit card you have not used
in a while, consider making a small purchase and
paying it o immediately. Keeping an account open
can increase your overall debt availability, which
could raise your business credit.
• Repair any current credit damage. Once you
identify problem areas, see what you can do to move
things in the right direction. Consider these steps:
1) reduce debt on revolving credit accounts
2) obtain a secured bank loan
3) ensure you have at least two open credit
accounts—so “no credit” doesn’t mean
“bad credit”
• Pay o your credit balances. Paying o your
debt is one of the best ways to help x (or build) your
business credit rating. Decreasing the amount owed
on your business credit cards could have an
immediate impact on your score.
• Keep your debt load low. Try to keep your credit
balance at 20 percent to 30 percent of the credit
limit, if possible.
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You may have heard the phrase “cash is king.” What happens during lean times, when cash is
harder to come by?
There are two general ways to impact cash ow:
1) create additional income or
2) reduce expenses.
Some businesses are fortunate to have ample cash reserves or access to lines of credit to help carry them through
the COVID-19 (or any other) crisis. However, many businesses do not. If you fall in this second category, it’s a good
idea to create and implement an action plan to deal with your cash ow challenges. Here are some ideas to help
get you started:
REVIEW
Set a timeframe for your plan (common
timeframes are between three months and
twelve months).
Count your cash. Identify all cash accounts your
business can access (not credit cards, if you can
avoid it.) Leverage operating accounts, reserve
accounts, revolving loans, lines of credit, etc.
Determine your xed expenses. These could
include your mortgage, equipment leases, bank
loans, lines of credit, etc. Many experts recommend
prioritizing these expenses to get paid rst.
These crucial items can help you with business
continuation, and missing these payments could
have the largest negative impact on your
credit report.
Create a spreadsheet with your projected
operating activity. Typically, this would include
your projected revenue and expenses over the next
12 weeks (and in the future, in 12-week increments).
These gures are important as you develop your
cash ow plan. Be realistic, and pay special
attention to your normal operating and labor costs,
with the objective of identifying any cash shortfalls
or gaps you might experience.
TAKE ACTION
Cut costs right away, if necessary and
possible. One option you may have already
considered is reducing your labor costs, by cutting
employee hours or eliminating positions. Even small
things could make a dierence, like canceling
subscriptions, not ordering unnecessary oice
supplies, and other “extras.”
Investigate the potential for restructuring or
negotiating payments. You could contact your
landlord to seek a payment holiday—deferring one
or two months of payments to later in the year.
Contact your bank to explore the possibility of
interest-only payments in the near term. Talk with
other creditors about extended payment terms,
payment holidays, or other cash-stretching
measures they may be able to oer.
Identify new, temporary, or innovative income
ideas. Investigate small business loans, see if you
qualify, and if they would be a good t for you.
Brainstorm new products or services you can sell,
either in the short-term or for the long haul. This is
a great time to think outside the box and pivot.
Even consider a hobby or passion that could be a
potential money-maker.
Communicate frequently and clearly. Maintain
open lines of communication with your customers,
employees, lenders, vendors, and suppliers. You
need their support now, more than ever.
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synchrony.com
This content is subject to change without notice and oered for informational use only. You are urged to consult with your individual business, nancial, legal, tax and/or other
advisors with respect to any information presented. Synchrony and any of its ailiates (collectively, “Synchrony”) makes no representations or warranties regarding this content and
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© 2020 Synchrony Bank.
Synchrony is with you every step of the way. Access more
small business content at learn.synchronybusiness.com.
1
How Good Does Your Credit Have to Be for a Business Loan?
Guide to Business Credit Scores
Prioritizing Your Bills as a Small Business
How to Prioritize Bills When Cash Flow Is Tight
6 Ways to Manage Cash Flow in Your Small Business
What Is Cash Flow Management?
Get Growing: How small businesses can manage cash ow and cut expenses during COVID-19
Cash Flow Triage for Small Business During the COVID-19 Crisis
Small Business Coronavirus Impact Poll - June
Run My Small Business Resources
7 Strategies to Repair Your Business Credit
How to Repair a Low Business Credit Score
5 Ways to Eectively Manage Cash Flow
RESOURCE LIST
