As COVID-19 continues to ravage the nation and reopening efforts have had mixed results, millions of small businesses are reeling from the subsequent downturn that the virus has caused. With many seeking assistance from the SBA as well as aid from state programs and trade associations, small businesses that are weathering the pandemic are looking for creative ways to stay afloat. Seeking out additional private loans and other types of debt if PPP and EIDL were insufficient can be a short-term fix, but no one knows how long this situation will last and it could cause lasting damage to your credit rating. Here’s how you can keep your credit rating safe in these uncertain times.
1. Pay your bills on time.
Make timely payments on your obligations, even if it’s difficult or you have to dig into personal funds. Many creditors are offering temporary reprieves or deferral if your cash flow is too constricted to make payments right now. Work with your creditors to defer or reduce your minimum payments because late payments will negatively impact your credit rating and make it harder to come out of this crisis.
2. Refinance any outstanding debts if you can.
Interest rates are at historic lows and many lenders are being more flexible in light of the pandemic. If you have any large outstanding debts that are proving onerous to pay right now, refinance them. Taking out a business loan to repay other debt carrying higher interest can ease the impact of the payments, while also improving your credit rating based on the credit utilization component. Qualifying for a refinance of large debts can also boost your rating provided that you made the prior year’s payments on time.
3. Apply for the right financing assistance.
The Paycheck Protection Program has been extended until August. While the primary purpose of these loans is to cover payroll costs and they’ll be forgiven if that’s the case, you can also pay yourself with them if you don’t have employees. The SBA Economic Injury Disaster Loan program also offers low-cost loans for businesses impacted by COVID-19, and while they’re not forgivable like PPP, they won’t show up on your credit report if you borrow $25,000 or less because the SBA is not actually a lender.
For operating expenses for your business such as equipment, work with direct lenders like American Capital Group, who specialize in financing for businesses and will help to keep your purchases off your personal credit.
4. Monitor your credit
Signing up for a credit monitoring service can help save you headaches down the road. Monitoring services notify you if there is anything new on your credit report, such as a new account opened. They often can tell you areas where your credit is being affected the most and where you can make a quick adjustment to have the largest impact.
Using these simple practices can help you maintain and in some cases improve your score not only during an economic downturn but in any economic environment.