You may know how to maintain and improve your credit score through on-time payments and paying attention to how you use credit, but do you know how to manage your credit during difficult times?
Options such as loan deferments and forbearances can help you maintain good credit standing, even if your business is facing pandemic-related challenges from recent closures and the reopening requirements that followed. These and other credit-related options can lower financial stress now and preserve your credit for the long haul – and getting started can be as simple as a phone call to your lender.
If your business is financially pinched right now, reach out to your lender; they understand the challenges that small businesses are facing and responsible lenders will do what they can to help. Keep in mind that if your business is struggling and you don’t proactively take steps to seek help, your personal and business credit could be impacted for several years.
Here’s a simple three-step plan to help you maintain your credit as you move forward during this crisis:
Step 1: Continue to monitor your credit
While it’s always a good idea to stay on top of your credit history, it’s now more important than ever.
You might find that during difficult times that you’re distracted from day-to-day financial management while you try to adapt to challenges. Still, it’s important to take some time to focus on your credit standing each month.
It’s important to be well-positioned to apply for loans and lines of credit should you need them, so make sure that your credit report is accurate and that your credit score is in good standing. In particular, you want to be sure that issues that have been resolved come off of your report, such as errors on your credit history or late payment reports.
Action item: Request your credit report to check for errors and accuracy. You can request one for free at AnnualCreditReport.com. In addition, due to the pandemic, Equifax, Experian and TransUnion are offering free, weekly online credit reports through April 2021.
Step 2: If you think you’ll miss a payment, contact your lender or landlord immediately
Lenders and landlords have been helping business owners who are struggling with the financial impacts of business closures and limited re-openings. Specifically, lenders are assisting business owners on their loan payments by offering forbearances (a special agreement between the lender and borrower to delay a foreclosure) or deferments (an arrangement that allows you to postpone loan payments).
Neither a forbearance nor a deferment will harm your credit, as long as you’ve set an agreement up with your lender and are in compliance with the new terms. Although you’ll eventually have to pay back any missed amounts and possibly additional interest, both options can give your business the capital it needs in the short term.
The federal and state government have also partnered with lending institutions to provide business owners with financial relief. Some helpful actions they’ve taken include the following:
- Federal student loan payments are currently deferred with no interest until September 30, 2020.
- New York and New Jersey have passed programs to help you manage your commercial rent or mortgage.
- New York extended the PAUSE Executive Order to delay the eviction of a commercial property until August 18, 2020.
- New Jersey created The Small Business Lease – Emergency Assistance Grant Program to help mom-and-pop shops pay their leases with grants of up to $10,000.
If you need more time to get your business revenue up after reopening or to secure funding to pay your rent or mortgage, talk to your landlord or mortgage holder and see what you can work out.
- In addition to business loans and leases, know that many auto and student loan providers, credit cards and other credit providers may have programs available to help you reduce or defer payments until a later date.
Action Item: If you know that you’ll miss rent or a loan or other payment, contact your lender or landlord immediately. In most cases, they’ll be willing to work out terms that both of you can accommodate, such as reduced or modified payments and extended repayment terms.
Step 3: Further protect your credit with these best practices
It only takes days to damage credit, but it can take years to repair it. So, taking the steps to proactively preserve your credit standing is a smart move that will pay off.
Anything you can do now to maintain your good standing will help you in the long run. As you work out payment agreements with your lenders and landlords:
- Get any agreement with a creditor in writing.
- Contact your local credit-counseling services for assistance, especially if you feel like your needs will be longer term or if you’re overwhelmed by your circumstances.
We have additional options that can help
Pursuit may have additional options that can help you and your business survive these difficult times.
For example, you can lower your monthly payments and ease your business’s cash flow issues using our debt-refinancing options that may have better repayment terms. Or, maybe you need a working capital loan to help you rebuild inventory or to purchase safety-related personal protective equipment for your staff and customers. We can help.
Contact us today to learn more.
