Getting New Business Credit After Debt Restructuring and Consolidation
So, you’ve just gone through the difficult process of restructuring or consolidating your business debt. Maybe you had to make some hard choices to keep your business afloat. Now you’re ready to start rebuilding and growing again. But where do you start when your business credit is shot?
Take Care of Any Remaining Debts
If you still have remaining debts that weren’t part of the restructuring or consolidation, now is the time to tackle them. Work out payment plans or see if you can negotiate lower interest rates. Getting these fully paid off will help demonstrate that your business has turned a corner.
-Some options to consider:
- Ask vendors for extended payment terms
- Use business revenue to steadily pay down debts
- Consider balance transfer options to lower interest rates
Showing you can handle these leftover debts responsibly will go a long way on your road to credit recovery.
Review and Dispute Any Errors on Your Business Credit Reports
Just like with personal credit, errors can sneak into your business credit reports with Equifax, Experian, and Dun & Bradstreet. Before applying for new credit, it’s important to comb through these reports and dispute any inaccuracies. This will give you the cleanest slate possible as you rebuild.
Some common errors to look for:
-- Debts marked “past due” that were actually part of restructuring/consolidation agreement
- Duplicate delinquent accounts listed
- Closed accounts listed as open
- Debts you settled showing incorrect balances
Disputing errors properly can take some time, but it’s worth it. Learn more about the dispute process.
Establish New Lines of Credit
Once you’ve paid down debts and cleaned up your credit reports, it’s time to demonstrate you can responsibly handle new credit. Start small with a new credit card or small loan.
Some options suited for rebuilding credit:
- Secured credit cards that require a refundable security deposit
- Retail credit cards with low credit limits
- Small loans from community banks or credit unions
- SBA Express loans up to $25,000
Make sure to make all payments on time and keep balances low. This will show the positive payment history you need. After 6 months to a year of responsible use, you can apply for larger, more traditional business lines of credit.
Leverage Personal Credit Score
If your personal credit score is still strong, leverage this to help rebuild your business credit. Options include:
-- Personal guarantees on new business loans or credit cards
- Adding your business as an authorized user on a personal credit card (with responsible use)
- Co-signing for an auto loan for a company vehicle
As you demonstrate responsibility, lenders will gain confidence in lending directly to your business again.
Explore Alternative Business Financing
While traditional credit may take some time to regain, alternative lending options can provide much-needed working capital in the meantime. These include:
- Merchant cash advances based on credit card sales history
- Equipment financing
- Invoice factoring through online lenders
- Grants for businesses in certain industries or locations
The rates may be higher, but used strategically, alternative financing can be a temporary bridge to help your business rebound.
-Sign Up for Business Credit Monitoring
Finally, sign up for credit monitoring services so you can track your business credit scores with all major reporting agencies. Monitoring gives you access to your full credit reports and alerts for any changes. This allows you to stay vigilant for errors and opportunities to improve your scores.
Some popular monitoring options include Nav and Credit Signal. Signing up for alerts and monitoring progress regularly is key during your rebuilding journey.
Take It Slow and Steady
Recovering from debt restructuring or consolidation takes diligence, but it is possible to rebuild your business credit. Focus first on resolving old debts fully, then establishing new responsible accounts. Let your strong payment history speak for itself over time. With a slow and steady approach, plus alternative financing strategies, your business can regain its credit footing.
The process may seem daunting, but taking advantage of business credit reporting laws and programs designed to help recovering businesses can make it less stressful. Don’t be afraid to seek help from a credit expert or financial advisor as you rebuild. With persistence and responsible habits, your business can bounce back stronger than ever.