Every year, the holiday season seems to start earlier and earlier. For small business owners who rely on holiday sales, it’s never completely out of mind. 

One factor that can impact a company’s success during the holidays is its business credit rating. A solid credit score can open doors to better financing options, more favorable terms with suppliers, and increased flexibility in managing cash flow during this hectic time.

The holidays are a key time for Myrlande “Mimi” Desances, the owner of MY’s Fresh Smoothies And Spices which specializes in helping busy individuals maintain a healthy lifestyle by providing convenient and nutritious alternatives to conventional snacks and beverages.

“It helps to generate more sales and create brand awareness,” she says. She gains new customers as people search for gifts and “focus on wellness for their New Year Resolutions.” She also uses the season to engage with her community through events and partnerships that she says “enhance customer loyalty and create lasting connections.”

The holiday season includes five days when consumers and businesses often spend more than usual; days that are critical to boosting the bottom line. 

“The Cyber Five, which includes Thanksgiving, Black Friday, Small Business Saturday, Cyber Sunday, and Cyber Monday, made up 16.2% of total US holiday retail ecommerce sales in 2023.” That’s according to a February 2024 EMARKETER forecast.

You can start preparing for a successful holiday season now.

How a Solid Business Credit Rating Can Benefit Businesses During the Busiest Time of the Year

The holiday season is a critical period for many businesses, with some retailers generating a substantial portion of their annual revenue during these few months. 

The quarterly quarterly MetLife and U.S. Chamber of Commerce Small Business Index in 2022 found that eight in ten (79%) business owners surveyed said the holiday season is important for their overall profit. 

A strong business credit rating can provide several advantages that are particularly valuable during this time:

1. Access to better financing

With good credit, businesses may be able to secure small business loans or lines of credit with lower interest rates and more favorable terms. This can be crucial for purchasing additional inventory or hiring temporary staff to meet increased demand.

2. Improved supplier relationships

Supplier credit is an important tool for cash flow for many small businesses. With payment terms (such as net-30 terms), a business can buy supplies and pay for them later. Vendors may offer better payment terms or larger credit limits to businesses that are considered creditworthy, allowing for greater flexibility in managing cash flow.

3. Enhanced credibility

A solid business credit profile can improve a company’s reputation with strategic partners, lenders and suppliers, which is especially important during the competitive holiday season.

4. Greater financial flexibility

Strong credit provides more options for managing unexpected expenses or taking advantage of sudden opportunities that may arise during the holiday rush. Need more inventory quickly? Want to set up a new payment processing account? Good credit may help. 

The Importance of Good Business Credit During the Holiday Season

The holiday season can put significant strain on business finances. Increased demand often requires larger inventory purchases, additional staff, and ramped-up marketing efforts. At the same time, extended payment terms for customers can create cash flow gaps. 

Good business credit can help companies navigate these challenges by:

1. Providing access to necessary financing: Whether it’s a short-term loan for inventory or a line of credit for managing cash flow, good business credit scores open up more financing options.

2. Securing better terms: Businesses with strong credit may qualify for lower interest rates and more flexible repayment terms, reducing the overall cost of borrowing.

3. Offering a safety net: A good credit rating can provide peace of mind, knowing that your credit history won’t be a hurdle if you need to apply for a small business loan or other financing. 

Steps to Prepare Your Business Credit for the Holiday Season

If your business doesn’t have a business credit history, learn how to establish business credit first. Once you’ve established business credit, here’s how to keep it strong:

Review your business credit reports

The first step in building business credit is understanding where you stand. Obtain your business credit reports from major commercial credit bureaus such as Experian, Equifax, and Dun & Bradstreet. Review these reports carefully for any errors or inaccuracies. If you find any issues, dispute them promptly with the relevant credit bureau.

Pay down existing debt

Reducing your credit utilization ratio— the relationship between your available credit limit and your balance—can have a positive impact on your business credit score. Focus on paying down existing debts, especially accounts with high interest rates. 

Build a positive payment history

Payment history is a crucial factor in determining your business credit score. On time payments are key to good credit, whether you’re talking about personal credit scores or business credit scores. That’s why it’s so important to pay on time. 

Since the holidays can be hectic, don’t let payments slip through the cracks. Consider setting up automatic payments for regular expenses to avoid late payments. If possible, pay invoices early, as some business credit scoring models reward early payments.

Apply for new credit strategically

Think seriously about opening new lines of credit well before the holiday season. That way, if you need to tap one, it will already be available. 

Get a business credit card

Getting a new small business credit card can also be a good idea. Not only do most business credit cards help establish business credit when paid on time, many offer rewards. 

If you need to finance purchases over the holidays, a 0% intro APR business credit card may allow you to do that without incurring finance charges. 

Most small business credit cards are available to startups as well as established businesses. (A personal guarantee is often required, though, so spend carefully.) 

Monitor your credit regularly

Keep a close eye on your business credit score and reports throughout the holiday season. Regular monitoring can help you catch any potential issues early and allow you to address them promptly. Consider using a credit monitoring service to simplify this process.

Maintaining Good Credit During the Busy Holiday Season and Beyond

It’s almost cruel that the holidays fall at the end of the year, when many businesses also need to complete their bookkeeping and get ready for tax time. But since you can’t change it, you’ll need to adapt.  

Here are some strategies to help maintain good credit during this crazy hectic time:

1. Manage cash flow carefully

Although this sounds obvious, it’s often easier said than done. If possible, take time to run cash flow projections before the holidays to anticipate potential tight spots. Look for ways to improve cash flow. For example, consider offering early payment discounts to customers who pay quickly. 

Keep in mind that you may have bills you want to pay before year-end for tax deduction purposes. Make sure you can afford to do that.

2. Be careful

Credit can help your business weather the cash flow challenges of the season. But it can also mean your business ends the year with debt—and that can get expensive. Keep balances low on revolving credit accounts when possible.

Desances found this out the hard way. 

“One mistake my business made when I first started was underestimating the total expenses involved in holiday promotions and inventory purchases,” she says, “which lad to overspending and accumulating more debt than anticipated, making it challenging to repay after the holiday rush is over.”

3. Communicate with creditors 

If you have a good track record with suppliers, ask whether they can extend longer payment terms during the holidays. Instead of net-30 terms, for example, you may want to ask for net-45 payment terms. 

If you anticipate any payment issues due to unexpected cash flow problems, be proactive in communicating with your creditors. Some may be willing to work with you.

4. Continue credit monitoring 

Yes, you’ll have a million things to do, but don’t get distracted from keeping an eye on your credit. The last thing you want is an identity thief to take advantage of your good credit during the holidays. 

The Bottom Line: Building a Solid Business Credit Rating Before the Holidays

Desances, a Nav member, is looking forward to the holiday season again this year; but this time she’s planning more carefully. 

“To prepare for the holidays from a credit perspective, I am assessing my cash flow and planning to apply for a business credit card or line of credit to manage increased expenses effectively,” she explains.

“Additionally, I am creating a detailed budget that outlines projected costs for inventory, staffing, and marketing, ensuring that I can make informed decisions about my business credit usage. I will also monitor all expenses closely to avoid overspending and develop a clear repayment plan to maintain financial health after the holiday season. 

“This strategic approach will help my business capitalize on holiday opportunities while managing credit responsibly.”

You can do the same. It’s not too early (or too late) to get your business credit and finances in shape for this year’s holiday season. 

Nav can help. Nav provides the most comprehensive view of business and personal credit of any service available, along with tools to help small business owners improve their financial health and reach their business financial goals.