What’s Your Business Credit IQ?

Avoiding business credit is like avoiding wrenches. When a wrench is the best tool for the job, use a wrench, not a hammer. The same goes for credit. Plus, regular use of credit – even if you have other good options – builds your credit history. And that can be really helpful when you need extra financial flexibility to follow up on an opportunity or deal with an emergency.

While cash has a reputation for being the fastest and easiest way to get equipped, financing has become such a quick and simple process that there’s often no meaningful difference in speed or ease. Let’s say you want to acquire business equipment worth $150,000. With the right equipment financing company, you’ll answer just a few questions and can expect a credit response within hours. No need to dig up a lot of records and reports and in most cases, you’ll take possession of the equipment as quickly as you would have if you’d raided your cash account.

While it may seem like a good idea to tidy up your credit, think twice before closing old but active accounts. For lenders, the best predictor of whether you’ll pay in the future is whether you’ve paid in the past. Closing old accounts shortens your documented history of responsible borrowing, which can hurt your business credit score.

Running your accounts up to or near their limits is a red flag for lenders. It’s called “high credit utilization” in the industry and it suggests tight finances. Even if you’re paying on time, lenders get nervous when they see you pushing so close to the edge of your available borrowing resources, so don’t be surprised if you get higher rates and shorter terms to compensate for the extra perceived risk.

It’s true that larger loans can be easier to get from some lenders, but that doesn’t mean you should necessarily pay cash or use credit cards for smaller equipment acquisitions. Give yourself the option to hold onto your cash and avoid high interest rates by choosing an equipment finance company that’s happy to finance your smaller acquisitions, as well as the big ones.

One-stop financing for real estate, vehicles, equipment, furniture, fixtures, and more is attractive to time-starved business owners. But not every provider has the expertise to give you the best terms and most flexible options for financing every kind of asset a business needs. In the long run, you’ll save money and time by using a variety of financing sources and choosing the best options for your assets and business needs.

Actually, financing is one of your best options for putting technology to work in your business. For one thing, you can finance 100% of the hardware and software that goes into your solution. Plus, with financing you don’t get stuck owning a rapidly depreciating asset. And with the right financing, it’s simple and quick to upgrade to the latest technology any time during your agreement, so you’re always up-to-date.