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the Restaurateur

Managing Your Credit as a Restaurant Owner

March 30, 2015

Reduce business costs by adopting better practices for managing your credit responsibilities.

Managing credit has always been a tough task for restaurant owners, and a bad credit history often lowers your chances of scoring deals with lenders and suppliers. With the decrease in recent years of people dining out, the rise in food costs, and increased transportation expenses, it has become very difficult for restaurant owners to prosper. Maintaining a good credit score during these difficulties by whatever means possible, however, will show potential lenders and suppliers that your restaurant is responsible and determined to succeed.

First thing’s first

The first step towards managing credit in the restaurant business is ensuring that your business’ information is up to date and accurate so that it is approachable for potential lenders and suppliers. Dun & Bradstreet Credibility Corp. offers a portal for vendors and others to use in order to assess clients. Visit the D&B site to view your restaurant’s Data Universal Numbering System (DUNS) number, one nine-digit number is usually assigned to each business in the database. This is how you can evaluate your business’ current information. You can add financial data, like a profit and loss statement to give potential lenders a more accurate picture of your business and why they support you.

3 ways to better manage credit as a restaurant owner

  1. Pay all your bills on time! Be sure to make a conscious effort to pay business bills, particularly major ones, when they’re due. By doing so you will maintain a seamless credit score and a good business reputation. If you are unable to pay your bills in a timely manner, do not simply ignore the problem! COMMUNICATION is key- if you know you will be late on a payment, talk to the person or business you owe and work out a payment plan. Restaurants specifically require a large number of suppliers, so be sure to organize your finances in a way that your payments are manageable each month.
  2. Separate business credit from personal credit. Using home equity loans is a popular last resort for independent restaurant owners looking to finance a new business concept, but that is a chancy move. As your business liability increases, your personal liability will as well, so you will want them to be separate. A good business credit score does not depend on personal credit at all, so relying on that will not improve your credit situation.
  3. Make sure that your credit record shows your payment history. Indicate to potential lenders and suppliers that you can meet financial obligations by keeping a detailed record of payments you have submitted on time. You cannot establish a business credit history without doing this. Adding your DUNS number to the application of a new vendor addition, or the purchase of anything on terms could show lenders that investing in your business is a good risk. It can positively influence suppliers as well.

Despite the struggles within the hospitality industry in recent years, it is important to do whatever possible to maintain a respectable credit score. A business credit score is judged on a 0-100 scale, and most lenders consider a “75” a decent score, so anything less will make it significantly harder to get lenders on board with your business.

Questions? Contact any member of our Hospitality Services Group.

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