By Alexander Barthet

A lot of things go into running a small construction business. You end up wearing several hats: salesperson, estimator, bookkeeper, laborer and project manager. With so many responsibilities, it’s easy to overlook things, such as building and maintaining good credit.

Why Do You Need It?

Cash flow is one of the major concerns of any business, especially in the construction industry. Credit can provide you an injection of additional dollars. This could allow you to expand and even to become more profitable. There are additional benefits as well.

  • Access to money when you need it. When it comes to owning a business, too much demand is typically a good problem to have. But if you lack the financial resources to take on jobs, you can end up like countless other businesses that failed because they couldn’t afford to finance their own growth and couldn’t get a bank to lend them the money they need. Commercial lenders don’t offer loans to businesses with bad credit or no credit history.
  • Better finance terms. When you need to borrow money, a positive credit history will net you more favorable terms. Whether you are applying for a credit card, a line of credit, or a loan, a higher credit score means lower interest rates and easier access to the funds you need.

Good Credit

With a little practice and some effort, you can quickly establish a positive credit profile. Here are three things you need to do:

  • Know your customers. Investigate your customers before extending credit. Whether you work with known companies or new customers with whom you have had no prior experience, be careful about giving credit.  Don’t be so quick to advance your labor or to purchase materials.
  • Stay on top of your business credit profile. As with personal credit, you must regularly check your business credit profile for fraudulent activity and inaccurate information. If you don’t have a business credit profile, contact Dun & Bradstreet, which maintains credit files on businesses. It assigns credit scores to business entities based on a wide range of factors, including revenue, location, number of employees, length of credit history, and type of industry. Lenders will use this information to determine your company’s creditworthiness.
  • Pay your bills and pay them on time. This is similar to personal credit and just as important. Paying your obligations on time demonstrates that you have the resources to cover your debts. It also shows potential lenders that you