Small Business: A Plumber Should Never Be Caught With His Pants Down

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I remember when my stepfather struggled to pay his small business plumbing company material bill.  In most cases, cash was short in his business.  But the one thing I remembered was my mother protecting their credit rating.  She did it as a matter of principle, but in the end, it helped his small business get out of some tough spots.

A pretty good article Good Credit Rating can Pay off for Small Firms in Many Ways by Cyndia Zwahlen popped up in the L A Times, recently.  She preached the benefits of  a small business  of keeping their good credit rating.  Oh sure, a good credit rating works wonders for getting a loan, but there was more according to her.

  1. Better payment terms for vendors:  If you are a new small business, or engaging a new vendor, your bad credit rating can place you in an undesirable catagory.  I remember when I transferred between schools when I was 10.  I was a good student, but the new school didn’t know it.  So, they place me in the “lower” math class.   I had to fight for good grades and recognition to get to the advanced class.  The same goes for your credit history.  You might be the most timely customer the vendor has seen, but your credit history tells another story.  Don’t be caught in the “lower” credit rating.  A good credit score can add to your bottom line with better terms.
  2. Safety credit line:  The article emphasizes the strategy of getting a credit line when you don’t need it.  If your credit is good, the rate and points could be lower.  Thus, when an economic downturn hits, you have a safety net to bridge your small business.
  3. Buying another small business:  The article does not mention this, but if your business is growing and you are trying to acquire a new business on installments, a bad business credit score can work against you in the negotiations.  The higher the risk you are, the more uneasy the seller will be willing to come down to your price.

Small businesses must be good stewards of their money and credit.  The good will they can produce can help in acquiring new clients, or servicing the clients they currently own.

3 thoughts on “Small Business: A Plumber Should Never Be Caught With His Pants Down”

  1. Your mom probably saved untold amts of money. After 46 yrs of marriage, my husband & I faced a low credit rating due to a TV company. We felt we had been unfairly charged, so canceled & refused to pay the early cancellation fee. The company reported our actions to the credit bureaus. My husband had decided to “fight” the “big boys,” but thought he was losing. I did a web search to find a phone number so he could see if we could “settle” & get the bad rating removed. We were amazed at what we learned through the search: All 50 states had multiple lawsuits against this company. We had missed the date to be part of the suit, but Paul called the BBB, our bank, and the credit bureaus with this information. It was time-consuming, but he “won the battle.” All 3 credit bureaus removed the “bad” credit rating. Technology and the tenacity of my husband saved us from current & future higher interest rates. Your article clearly points out the importance of a good credit score.

    1. Thanks for writing. I come across clients that have lost homes and are losing homes due to the economic downturn. I remember when some were saying to not pay your mortgage for a year so you can qualify for the modification. Well, that blew up. Kudos for Paul for beating the big boys.

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