Restaurants often struggle with managing their credit, which hurts their chances with both lenders and suppliers. Restaurant owners who have figured out the credit game not only fare better with lenders but suppliers as well: lower prices and longer payment schedules, for instance.
Dun & Bradstreet Credibility Corp. director Amber Colley provides some tips for improving the credit picture. DBCC provides a portal that allows small business owners to manage the reports furnished by Dun & Bradstreet, which vendors and others use to evaluate clients.
A good place to start, Colley says, is to visit www.dandb.com to see if your restaurant or company has a Data Universal Numbering System (DUNS) number, a nine-digit number that D&B assigns to each business location in the D&B database. If not, one can be assigned.
Next up: make sure the information is accurate, up-to-date and reflects the size of the business. If possible, add financial data, such as a profit-and-loss statement, that paints a more detailed picture of the enterprise.
“All that type of information provides the lender enough insight to make an educated decision about whether to partner with you,” she explains.
Three ways a restaurant can improve its credit score over time:
1. Separate personal from business credit. Independent restaurant owners often resort to financing a new concept using home equity loans, but that’s a risky move.
“You want to separate them because as your business liability grows, so does your personal liability,” Colley explains. And relying on personal credit does nothing to establish a business credit score.
2. Make every effort to pay business bills, especially the major ones, on time. “Not every trade experience is equal,” Colley says. “They are dollar weighted. A $10K experience means more than $50.”
3. Ensure that payment experiences are included in your credit history. Having a record of timely payments shows you can meet financial obligations, something that is especially important for a new business working to establish a business credit history.
“If you add a new vendor, or purchase anything on terms, make sure to add your DUNS number to that application,” Colley advises. Doing so will provide more evidence that your business is a good risk; it also can provide some leverage in dealing with suppliers.
“If you’ve been paying your bills on time for six months, it might be a good time to negotiate better terms,” she adds.