U.S. e-commerce revenue is about $423.3 billion and steadily climbing, and there are virtually limitless opportunities for average people to become entrepreneurs and be in charge of their own e-commerce business. However, having financial knowledge is imperative to any size business operation, and while most adults have a good understanding of their personal credit scores, there are just as many e-commerce startup owners that don’t fully grasp the implications of this illusive number and what it means for your business’s bottom line.
Business credit scores are calculated using a number of metrics, including outstanding balances, demographics, credit utilization, payment habits, public record, total experience, business size, and more. These categories can provide clues regarding how to raise this score, but without specific industry knowledge, it may continue to suffer, which can prevent you from taking out business loans or making other expansion efforts in the future.
“A strong business credit profile doesn’t just help you secure a loan; it’s also important for attracting new business. Unlike with personal credit reports, anyone — including potential customers, partners and suppliers — can look at your business credit report,” writes Teddy Nykiel on NerdWallet.
With that in mind, here are just a few ways to improve your e-commerce startup business’s credit score.
1. Keep Debts Low
This isn’t always possible, as unforeseen circumstances and expenses can arise at any moment. However, the key is to keep any debts as low as possible. Whether this means redirecting funds intended for other purposes or getting the capital elsewhere, this major factor can keep your e-commerce business’s credit score from plummeting because it helps your business maintain a low utilization of credit.
2. Prioritize Graphic Design
Yes, you read that correctly — you’re probably asking, “what in the world does graphic design have to do with my business’s credit score?”
The answer? More than you’d think. High-quality business designs, specifically, your business’s logo, can play a critical role in ensuring that your business has a one-of-a-kind identity and USP — unique selling point — to provide your customers or clients.
As opposed to outsourcing your business’s graphic design needs, consider interacting with teammates using a collaborative software such as Office 365, which gets about 50,000 new small business clients per month.
Whichever solution you choose, remember that there are countless ways to use technology to your advantage when it comes to creating a logo design that’s eye-catching and truly unique.
3. Avoid Late Payments At All Costs
Finally, it’s critical to make any and all payments on time in order to build your business’s credit score. Many business owners don’t think it’s a big deal to make payments a few days late, but you never know how stringent penalties and late fees can be. The combination of potential credit loss and late payments should be enough to deter all businesses, especially startups, from putting themselves in the position to incur them.
Ultimately, there’s no arguing that your credit score is an important financial metric, both in a personal and business context. Both can affect major financial opportunities and actions — an individual looking for a mortgage needs a credit score of 580 or higher to get an FHA loan for a mortgage with a down payment as low as 3.5%, and similarly, e-commerce businesses with higher credit scores can get larger business loans with better terms and rates. Understanding the importance of your e-commerce business’s credit score is the key to maximizing your business’s financial potential.