Invoice factoring is typically used as a way to get access to capital while waiting for payments of invoices by customers. However, since it requires repayment, you may wonder whether it can be an effective way to increase your business credit rating, giving you access to other financing options. Knowing how business credit is improved is a good start to knowing whether invoice factoring would help you accomplish your goals.

Building a Business’s Credit Rating

If you want to increase your business’ credit rating, there a couple of things you need to do. First, you need to get a Duns number. This number, issued by Duns and Bradstreet, is what potential creditors look for when considering offering financing to your business. Duns and Bradstreet is a major credit reporting company that deals with business credit. Second, you should have accounts open in your business name. Beginning with checking and savings, having open accounts in your business name will start to build financial records that are reported to Duns and Bradstreet, therefore establishing and building your business credit rating.

Using Factoring to Improve Credit

Factoring can be a way to improve your business credit. Factoring provides you with money for invoices that have not been paid. Along with getting access to this capital, factoring provides an opportunity to improve your business credit by:

  • Ensuring you can make payments on time to suppliers or lenders, which gives a good payment history. 
  • Showing you will have a good relationship with creditors by paying on time (or early). 
  • Having access to capital without increasing your credit usage.  

There are a lot of things that can influence your business credit rating positively or negatively. Using invoice factoring not only gives you an influx of capital while waiting for invoices to be paid, but it can also help improve your credit rating. With an improved credit rating, you can get access to other financing options and continue moving toward your business goals.