Credit Policy for businesses and how to extend credit and manage credit risk

When should a business open a line of credit?

When you want to:

• Purchase inventory or supplies and pay on account. 
• When your business starts to grow, so you can purchase on credit and keep your cash flowing smoothly, while building up a credit history that will grow with your business.

How do you know if it is the right time to apply for credit?

·        If you are able to pay your bills in full each month and are not struggling.

·        When you have been in business a few months to establish yourself, if you apply for credit the day you open your business, you don’t have any credit history and may not be approved. You will also have a Tax ID# and a bank account that can be checked as a reference.

How to find out if your business is in a good position to apply for credit:

Request a copy of a credit report from any of the credit bureau's.

Then ask yourself:

1.             Have I bounced any checks?
2.             Do I pay my vendors on time?
3.             Do I owe anyone money?
4.             Are my customers paying me on time?