Bad credit is a major factor for many Canadian banks and lenders, especially when it comes to offering business loans.
Fortunately, there are a number of ways businesses in the country are remedying the bad credit problem.
With healthy finances in mind, here are just few steps Canadian businesses are taking to improve their credit:
Credit Situation in Canada
Just like its neighbor to the south, Canada is still recovering from tough economic times. As a result, credit scores in the country for both households and businesses are in recovery too.
According to a recent study by Statisitcs Canada, there was more than $5 million in outstanding balances for Canadian businesses and households in 2014.
RECENT TOPIC: The three things a CEO should never say to an employee
These balances include outstanding debt reported by chartered banks, mortgage companies, and credit unions.
In addition, nearly 35% of Canadians, including business owners, have credit scores in the 520 to 749 range. This is considered an average to extreme risk for lending agencies.
With numbers like these, the question is what are Canadian business owners doing to reverse their bad credit?
Paying Bills on Time
As the article “Just what exactly is bad credit?” asks, well, it's a low credit score that's a direct result of one of more financial factors, including delinquent payments.
One of the fastest ways a business can improve its credit score is by paying all bills on time. This includes credit card and utilities bills as well as mortgages and business loans.
When payments are even just a few days late, it can negatively affect FICO scores and reverse years of healthy credit.
Continuously making payments on time helps improve credit scores and keeps businesses in good standing with lenders.
RECENT TOPIC: Has Canada developed a medical breakthrough?
Keep Credit Card Balances Low
Just about every business uses a credit card in order to make daily purchases.
However, letting credit card balances increase can also negatively affect credit scores.
When there are outstanding debts associated with a business's revolving credit, it can lower credit scores over time.
To avoid this scenario, businesses should keep low credit card balances and attempt to pay off balances each month.
Accumulating and paying off credit card balances on a monthly basis is one of the fastest ways to improve poor credit.
Regularly Check Credit Scores
Contrary to popular belief, requesting and checking credit reports won't negatively affect scores as long as it's done through an authorized credit report provider.
By regularly checking credit reports, businesses can gain a better understanding of the financial actions that have a positive and negative affect on their credit scores.
Strict Loan Policies
In order to reverse the effects of bad credit on Canadian companies, lenders in the country are creating stricter lending policies.
Both financial institutions and private lenders are taking personal credit scores into consideration before offering business loans.
By taking a look at not just a business's credit score, but the business owner's score too, lenders are getting a clearer picture of the financial health of loan candidates. When personal credit scores are high, it's considered less of a risk for lenders.
When it comes to bad credit, many Canadian businesses are doing all they can to take steps in the right financial direction.
About the Author: Adam Groff is a freelance writer and creator of content. He writes on a variety of topics including budgeting and small business.