When businesses need money fast, it’s normal to look for funding elsewhere. While some can scrounge together financing from family or friends, others are forced to turn to loans or lines of credit. But what happens if your credit history is lacking or blemished? Factoring—freeing cash tied up in open invoices by selling them to a third-party—is a great way to make ends meet until your business becomes profitable again. But does factoring affect your credit history more? No, but also yes.

How to Build a Credit Score

When it comes to building credit, you have to be dedicated to maintaining responsible spending habits. It means not only making payments on time but also keeping your percentage used below 25%-30%. Building great credit takes time, but as soon as you start making the right financial decisions, you’ll start to see the changes immediately.

Your Business’s Credit Rating

Businesses are a little different than your personal finances. Look into finding your business’s Duns Number—a credit score specifically for your business. With this number, you’ll be able to apply for credit and banking accounts directly in your business’s name. Keeping your business’s accounts in good standing helps to boost your Duns Number.

How Factoring Factors In

Even if your business has a less than perfect Duns Number, factoring can help give it a boost. Selling open invoices frees up money that you can use to pay off lines of credit. If you schedule these payments correctly, you’ll slowly build a perfect payment record—something that will greatly raise your credit score.

Having cash on hand also means you can pay suppliers immediately. Building stronger relationships with your suppliers mean they will be more likely to extend your credit in the future if you need it. And finally, factoring can give you access to short-term capital when you need it rather than going through credit or loans, which could negatively affect your score.

If your business needs financing now but has less than stellar credit, give Coastal Commerce Lending a chance to help you out. We’ll buy your open invoices upfront and put your business back on track!