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Make Your Small Business a Winner: Credit - staying ahead of the game

by Anna Hipkiss

Credit is about three things:
• Where can you borrow money from, if you need it?
• Can your customers pay you on time?
• Can you pay your bills on time?

If you have a good answer to these three questions, you have credit well under control. If you don’t, then you are likely to be at serious risk, particularly when times are hard.

In difficult economic conditions, banks are reluctant to lend, but banks aren’t the only source of funding: private investors may be a better option. Ideally have a source of funds in place before you need it, then there will be no whiff of desperation, the turnoff for any investor or lender.

Keep an eye on the credit status of your customers, particularly if you deal with a few large ones. Take nothing for granted, things can change and a good payer may suddenly become a bad debt. If you see trouble ahead, ask for payment upfront.

It is important that you are seen as creditworthy by your suppliers. If you don’t pay up, you might contribute to their demise, and then you’ll have to find a replacement supplier, which can create its own problems.

It’s a tough discipline to anticipate problems like this, but it’s what you need to do to stay ahead, and ultimately to stay in business!



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