From economic recessions to unforeseen calamities, the resilience of businesses is continuously put to the test. In such challenging times, safeguarding the creditworthiness of a company is a top priority for entrepreneurs and business owners alike.
With a multitude of factors impacting a business’s credit score during a crisis, it becomes crucial to implement strategic measures that can shield the company’s financial reputation from enduring irreparable damage. Below, 17 Forbes Business Council members share different ways business owners can protect their business credit and ensure a stable financial foundation despite the odds.
1. Implement Automated Solutions
Think of “smart contracts” as your fail-safe insurance. Such automated solutions can step up when things are getting tough, ensuring financial stability and a seamless transition. These kinds of strategies are like seasoned pros on your team, so lean on the guidance of legal and financial experts to make them work sharp. – Oleksandr Strozhemin, Trinetix
2. Have A Good Banking Relationship
Create a win-win banking relationship. Enable and leverage your relationship with your bank to help you in times of crisis. Having a clear grasp of your P&L statement month over month is critical as this will be some of the first documents you’ll need to supply. Regular meetings with your banking officer and making it a point to refer others to your banking officer will help when in crisis. – Jeff Giagnocavo, Gardner’s Mattress & More
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3. Set Up Vendor Partnerships
Lean times are times to set up strategic partnerships with vendors, working on a revenue share basis to ensure that most fees or expenses are on a success fee basis where revenue generated is split as agreed. This will not only help you sort out major overheads that you would have had to pay upfront or before you create income, but it will also allow you to use your cash reserves for minimal upfront expenses. – Onyekachi Ginger-Eke, Edutech Global
4. Create A Plan
Make a plan. Just as a great business plan for profitable and sustainable growth considers the rewards, it also considers risks. Some of these risks are difficult to control or influence but they can have a major impact. Businesses should always consider a series of mitigating actions that can be taken in different scenarios, not unlike a business continuity plan. In many regulated sectors like banking, these plans are mandatory. – Marian Evans, Elevate BC Ltd
5. Communicate With Creditors And Suppliers
One way for a business owner to protect their business credit during a crisis is to maintain open and transparent communication with creditors and suppliers. If you’re facing financial difficulties, reach out to them to discuss your situation and negotiate payment terms or temporary relief options. This shows responsibility and can help preserve your business relationships. – Zaid Al-Hindi, Imperial Citizenship
6. Consult Experts And Stakeholders
In times of crisis, safeguarding business credit is pivotal. Proactively communicate with stakeholders, even during prosperous times, to foster trust. If payment challenges arise, renegotiate terms promptly. Consult financial experts and periodically review your credit reports. Address discrepancies with major credit agencies, ensuring an accurate representation of your business’s financial health. – Jochen Schwenk, Crisis Control Solutions LLC / Schwenk AG
7. Have A Crisis Credit Compass
In stormy financial seas, let your business have a crisis credit compass. When pre-charted, it points to trusted advisors, alternative revenues and crisis budgets. Navigate rough waters with foresight, not fear. – Arvin Khamseh, SoldOut NFTs
8. Use A Business Line Of Credit
A business line of credit is one of the most effective ways to protect your business credit score. It provides access to funds that can be used to cover expenses like payroll and emergency operational costs or manage cash flow during a crisis or a downturn in sales. Limit spending on nonessential overheads and maintain an emergency reserve fund. Also, repay it quickly to avoid interest and fees. – Adam Povlitz, Anago Cleaning Systems
9. Open A Cash Reserves Account
What many people do in real estate is have a cash reserves account. This can also be applied to business matters. The reason you want a cash reserves account for your business is so that in times when interest rates are rising, like they have over the past year and a half, you can cover your debts and not have to accrue new ones to keep your business afloat. – Joseph Kimbrough, Apex Real Estate Investments
10. Maintain A High Credit Score
Keep your credit scores up. Ensure all payments are done on time to the bank or the loan provider so that you do not end up in their delinquent list of borrowers. In addition, with high interest rates, you want to pay your credit as quickly as possible so you do not incur expensive interest charges. You actually save your business money by paying on time. – Zain Jaffer, Zain Ventures
11. Trim Expenses And Make Better Deals
During tough times, protecting your business credit is like safeguarding your home during a storm. Focus on your financial health. Trim expenses, chat with suppliers about better deals and keep cash flowing. Be creative and think of new income sources. Don’t pile up debt; it’s like adding weight when your ship is sinking. Remember to keep customers happy so they are more likely to pay on time. – Stephen Sokoler, Journey
12. Provide Multiple Ways For Customers To Pay
Ensure you are not waiting for the “check is in the mail” response; accepting credit cards is a better way to get paid so you are not the “bank” for your customers, especially in B2B. Make sure you have more than one business credit card to buy goods and buy from suppliers who will give you deals because they need to move inventory. Being aggressive is good in uncertain economic times. – Allen Kopelman, Nationwide Payment Systems Inc.
13. Maintain Six Months Of Internal Reserves
One risk during lean times is the deterioration of cash flow. This increases the risk of delayed payments to business partners. A decline in trust from business partners will have a major impact on business and ultimately lead to a decline in customer service. In order to avoid such situations, companies need to make efforts to maintain at least six months’ worth of internal reserves at all times. – Karita Takahisa, UNIFY PLATFORM AG
14. Be Honest
In a crisis, a business owner should approach creditors with honesty about their situation, perhaps over coffee or a personal call. Being upfront, exploring flexible payment options and even leaning on personal relationships can make a world of difference in preserving business credit trustworthiness. – Khurram Akhtar, Programmers Force
15. Evaluate Critical And Optional Expenses
A business facing lean times has several options they can choose from to lower their overhead costs. The first thing they should do is evaluate their critical expenses such as utilities, rent, etc. versus the optional expenses. This is a time to contact vendors, renegotiate contracts and look for savings. One might also look for duplicated costs and inefficiencies and cut them. – Alexander Chandler, Alexander Advisory Group
16. Diversify Revenue Streams
In the property management and real estate industry, protecting business credit in a crisis necessitates strategic financial planning. As a global company, we diversify our revenue streams and maintain robust cash reserves. This approach ensures financial stability during lean times, preserving the company’s creditworthiness and facilitating a swift recovery when market conditions improve. – Johan Hajji, UpperKey
17. Underutilize Business Credit
Underutilize business credit as much as possible. Always leave room for lean times. When those times come, that open credit will come in handy. – ‘Smitty’ Robert J. Smith, Robert J. Smith Productions
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