Credit tips for small business electricity plans. There is nothing “small” about the amount of work it takes to run your small business. If you are like most businesses, the cost of electricity makes up a significant part of your operating expenses. Shopping for commercial electricity rates is more streamlined than ever before. However, credit policies between electricity providers vary widely. Electric companies use a number of different credit reports and approaches to determine if your business is required to post a deposit for service.
Electricity Provider Credit Sources
Electricity providers typically rely one of the mainstream business credit-scoring products. These include Dun & Bradstreet PAYDEX Score, Experian Intelliscore Plus, Equifax Business Credit, and FICO SBSS Credit Score. Each of these credit sources varies in its coverage and its scoring model. Your business may not be listed in all credit-scoring products. Another interesting aspect of your commercial credit score is that it often factors in your personal credit score.
Business credit scores rely on many of the same factors as your personal credit score. The most commonly used criteria is how timely your business makes payments. A business that has made on-time payments in the past poses less collections risk than one with a history of late payments. Maintaining a healthy debt-to-income ratio and using credit accounts responsibly will also help increase your business credit score.
Limited Credit History
Your business, like many small commercial businesses, might have a limited amount of credit information on file with the credit bureaus. This is because small business relationships are often local and neither party regularly reports payment information to the major credit bureaus. This creates a problem for electricity companies who need to assess the creditworthiness of a potential customer. Customers with good credit can often avoid paying deposits. Stellar credit will also enable you to get the best commercial electricity rates and lock them in for longer terms.
When your business has a limited credit history on file with the major credit services, electricity providers may pursue other means of evaluating your creditworthiness. First, they might request a copy of your audited financial statements. However, this is usually a problem for small business owners. Most business owners keep their books on spreadsheets or use off-the-shelf accounting software. Audited financial statements are rarely available.
Another option is for you to demonstrate a solid payment history with your current electricity provider. This usually involves providing copies of electricity bills for the past 6 months or more. Prospective electricity providers will be looking for evidence of on-time payments. Late fees and unpaid balances may result in a deposit being required or the term of the offer being limited. Furthermore, an electricity company may decline on making an offer altogether.
Electricity Shopping Tips
You need to know where your business stands on credit before shopping for low electricity rates. Checking scores with multi-bureau credit reporting services can identify trouble spots that need to be addressed to get the lowest electricity rates. Sometimes, small businesses struggle with being timely on payments to other suppliers but always pay their electricity bills on time. Having copies of your electricity bills handy will be helpful in getting good rates and terms. Armed with your business credit scores and proof of good payment history, you should qualify for preferred rates from multiple electricity companies. Finally, be sure to give the electricity company or electricity broker the legal name of your business as it is likely to appear in credit reports. This increases the chance of the electricity provider accessing the credit report for your business.
You talked about “maintaining a healthy debt-to-income ratio and using credit accounts responsibly.” It is important that businesses keep a good credit standing or account for themselves because this could very well impact their dealing with companies such as electricity providers. These companies would normally check your previous account history and base their collection on how you are able to immediately pay off your debts. If I have a business of my own, I would make sure to maintain a good credit standing. Thanks.