7 Ways To Improve Your Credit Profile -- And Improve Your Bottom Line

Financial Factors

While there are plenty of sources for channel financing these days, solution providers still need to be financially sound in order to secure credit and/or capital. That means having a strong credit profile that won’t scare off lenders or potential investors. Besides paying your bills on time -- the biggest key for businesses and consumers alike -- here are seven more ways to increase your credit profile and improve your bottom line.

1. Limit Your Debt

While it may sound obvious, limiting your debt is hugely important today, especially when more and more capital is available to solution providers. The temptation for some VARs may be to grab too much financing and overextend themselves. Even if a company can technically borrow more money, solution providers sometimes say it's best to self-fund in order to keep the debt financing down and look more attractive to potential investors and lenders down the road.

2. Look For Red Flags In Your Credit Rating

Unlike consumer credit reports, business credit reports aren't free. But for a small price, an annual credit report gives solution providers the ability to address any problems or issues with their scores -- and prevents them from being blindsided when they go to secure a loan or extend credit. Solution providers also can invest in business credit monitoring to prevent any fraud or abuse. Business analyst firm Dun & Bradstreet recommends checking your credit report twice a year.

3. Make Sure Your Good Behavior Is Reported

Finding red flags and potential fraud in a credit report is crucial, but sometimes a business' credit profile can hurt us by what's not there. If your creditors aren't reporting your consistent, timely payments and general good behavior to the credit agencies, then you could be stuck with a lower score than you deserve. Solution providers should regularly check with lenders, distributors and vendors to make sure nothing's missing from their payment history.

4. Check Your Customers Credit Profiles

So you've checked your own credit reports for red flags and good behavior. Now it's time to look at your customers' credit profiles. Agencies like Dun & Bradstreet say it's a good idea to check the credit histories of prospective clients to make sure they're financially sound and are going to pay their bills on time. In addition, regularly checking clients' credit histories even after they've signed on the dotted line can help solution providers spot trouble and reduce risk.

5. Hunt Down Late Payments

VARs expect their customers to pay them on time, but it doesn't always happen. Having client payments slip through cracks can not only hurt cash flow but it can also cause major organizational headaches for solution providers, who may be forced to use expensive collection agencies. To reduce those problems, VARs can outsource their accounts receivables to third parties like Synnex. Solution providers say that having clear terms of service and a consistent payment collection process also helps keep the headaches to a minimum.

6. Keep Your Personal Finances Healthy

It's one thing to have a sound financial structure for your business. But if you're an owner or co-owner of a solution provider and your personal finances are a mess, you could be in trouble. According to Dun & Bradstreet, creditors also may review your consumer credit scores during the process. Even though the business and personal credit ratings are separate, red flags for your personal finances could give creditors pause.

7. Don't Be Shy

Distributors and solution providers agree that having a website that's well-stocked with background information, current news and client case studies is a helpful tool. Having a website impresses potential lenders and creditors, who are eager to know just about everything regarding your business -- from revenue growth and new office locations to something as small as detailed biographies of the executive team. Information such as top vendor certifications and vendor or press awards are also pluses.