As a business, buying goods on credit is a facility that allows you to expand your scale with minimum risk. However, you must not misuse such a benefit, as it may have long-term consequences. Most of the transactions you make as a business are being recorded by some entity or the other. This is the reality of the times we operate in! Your payment history is used by the financial giant Dun & Bradstreet (D&B) to assign a Paydex score for your business. Once you start making payments to creditors such as Sam's Club through your bank account, the data is sent by them to D&B, which assigns the score based on the parameters laid down by it. If your firm has a Paydex score of less than 80, then the chances of getting a business loan reduce significantly. Even if you buy a shelf corporation, you will need to ace this metric to give yourself the best shot at business credit.
In the rest of the article, we will discuss some payment practices to adopt to maximize your business credit chances. Such a facility can be in the form of a credit line/loan by a bank or a credit union. It can also be trade credit such as bill discounting, LCs, and factoring, extended by your suppliers or others. In all these options, your Paydex score will be checked.
Pay on time to have a high Paydex score!
Some business owners take undue risks with their payment practices. Sometimes it pays to delay your payments to the last possible minute, as you can use the inherent credit available to enhance your business's scale. For example, you can sometimes pay after the due date to garner additional revenues from the extra time. In this calculation, most people will compare the extra income with the fine imposed and agree to make the deal if the difference is positive. If they were provided with the information that doing so could permanently dent their chances of obtaining a business loan, they would hesitate in doing so. The advantages of gaining a line of financing from a bank cannot be converted into financial terms. Think of what you can do with such funding on comparatively low rates of interest. If you pay on or before the agreed date, it reflects on your standing as a firm. Such a practice indicates to your lenders that their money is safe with your firm. After that, the process of accessing a corporate credit card becomes much more comfortable!
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