Is Your Credit Score Affected By Factoring?

As a business owner, you may have wondered if factoring can affect your business credit score in any way. The short answer to this is ‘no’, because factoring has no impact whatsoever on what your business credit score might be. However, it is very possible that factoring can indirectly impact your business credit score, because it can make your business more solvent and more stable, and that can lead to a continuously rising credit score.

Improving Your Personal and Business Credit Ratings

Both your personal credit score and your business credit score can be improved dramatically when you consistently pay off your bills and lower your indebtedness to other companies. Factoring can keep a steady flow of cash coming into your company because cash can be generated by selling your invoices, which is a constant asset. When you use at least some of the money from factoring to pay your suppliers regularly and to reduce your indebtedness, it can have the effect of improving your personal and business credit scores consistently.

How Factoring Improves Your Credit Score

Most small businesses are obliged to wait for customers to pay off their invoices so that they, in turn, can pay their creditors. When you have the cash in hand immediately from a factoring company, you’ll be able to pay all your bills on time and stay well ahead of your debtors. This will improve your standing with all of your suppliers, and many of those suppliers probably report to the business credit bureaus, which means your credit score will increase.

Another way that factoring can be a huge boost to your credit score is that it will give you the working capital that you need, without making use of credit. Part of your business credit score depends on how much credit you have in use at any given time, and if you can avoid using credit by instead using working capital from factoring, you’ll be way ahead of the game.

Would Your Company Benefit with Factoring? 

If your business typically generates a high volume of invoices every month, chances are you would definitely benefit by factoring. Contact us at Approved Business Lending so we can discuss how your company might be set up with a factoring arrangement.


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