Tips to secure credit (and ensuring it’s the right credit)

Stagnant growth. Missed opportunities. Reduced workforce. These are just three symptoms of a company that lacks access to credit. No matter how successful your business is, you likely have higher aspirations for it. And obtaining more credit and bolstering cash flow is at the center of your ability to innovate, expand, and reach new customers. 

So what can you do when you can’t obtain credit? Or what happens when you can’t obtain the credit you need when you need it, and as often as you need it? Let’s examine what makes this a unique problem today and one solution to look for to support the business growth you desire. 

What types of companies are impacted by credit challenges?

Companies of any size or industry may be impacted by lack of credit. Those in need of credit often don’t have the cash on hand, so small businesses may be more dependent on credit lines (and may have the most difficulty securing a credit line) than larger businesses. Some common characteristics of companies that might struggle to obtain a credit line are: 

• Lack of financial history (such as a start-up or new business)
• Lack of collateral to put up to obtain credit
• Too much debt for their income

Today’s challenges with credit

Credit is always top of mind for CFOs, finance directors, and anyone intimately involved with a company’s financials. Revenue, expenses, and securing cash flow are three pillars of any finance professional’s job. Today’s atmosphere for securing credit is unique for a few reasons: 

• Interest rates. High-interest rates create unfavorable lending terms for businesses. They lead to tighter lending standards and reduce companies’ interest in taking out a loan. The U.S. Federal Reserve maintains its position that lowering interest rates too quickly could hurt hopes of continued inflation rate drops, so this lending environment could continue concerning interest rates. Globally, you’ll see that interest rates (as of March 2024) have climbed recently in many countries. 
• Bank failures. The failures of five banks last year continue to cast a shadow over the lending landscape. Small businesses, in particular, feel the impact of turbulence within regional banking disruptions. 
• Personal liability. Companies that lack the cash on hand or assets needed for a loan may struggle to secure corporate-liability loans. In these circumstances, a company may pursue a personal-liability loan, which holds individuals at a company (typically the owner and/or CEO) personally responsible for repayment. Failure to repay a personal-liability loan can affect an individual’s credit. 

A question to ask when evaluating credit solutions

In light of today’s unique credit challenges, here is a question to ask as you evaluate payment providers that can help you achieve your business goals. 

Do payment providers offer both corporate-liability credit AND incentives? 

Some do. But not all. WEX offers both corporate-liability credit lines and incentives in the form of virtual card rebates. 

Stay up to date on the latest in business payments by subscribing to our blog! Simply click “Subscribe” above.

The information in this blog post is for educational purposes only. It is not legal or tax advice. For legal or tax advice, you should consult your own legal counsel, tax and investment advisers.