Best way to build credit fast is factoring
Credit rating – why it is so important?
The fact that the introduction of factoring can be worthwhile in your business is evident from the fact that creditworthiness in many cases determines whether your company can remain competitive over the long term or whether it is forced to give up in the face of unrealized investment opportunities.
The constant drilling of banks on the creditworthiness, especially when applying for a loan, once annoying. But behind it stands the perfectly legitimate question of whether your company is on a solid economic foundation.
Ultimately, credit quality is a measurement that exposes your company’s risks to collateral. And if the former gain the upper hand, then you are in an imbalance.
How to build up your credit score with factoring?
Factoring and creditworthiness: the context
This is where factoring comes in. Factoring simply means that we buy one or more receivables and pay you off in just two days.
That means very specifically:
- The default risk of the sold receivables does not apply.
- The payment process is accelerated enormously.
- The collection effort is eliminated.
Increase your credit score with factoring
The effect of factoring on your creditworthiness is immediate, as the individual default risks also reduce your overall corporate risk. This is all the more true if you use factoring to increase your equity share. And that is always welcome at financial institutions like banks.
Improve your credit rating with factoring.
Factoring is not free. For example, the implementation always entails fees that depend, among other things, on the default risk of the receivables. But these usually quite low costs can be quickly made up for by the now possible use of discounts.
How long does it take to get credit score up?
Under the normal conditions, client credit ratings increase between 1-6 months, but if you are in blacklist, this period may be lengthen out to 2 years. Additionally, you should know that if you arrange your payments quickly, your credit rating may easily increase in a short period. So it is up to your payment performance and financial situation.