If you are a small business owner and you are beginning the long and arduous process of registering for contracting with the federal government, it may be a good idea to improve your credit rating as much as possible during the months-long process. Why? Because one of the requirements you will likely need to meet when you land your first contract is to obtain a bond, which can be challenging if your credit rating is poor.

This doesn't necessarily mean that you need stellar credit, but anything you can do to improve your credit rating will improve the bonding process. However, credit rating isn't the only thing bonding companies look at. You'll also need to show proof of your company's viability. Here's what you need to know.  

Pay liens and judgments

If any liens and/or judgments have been placed against your business or against you as an individual, you'll want to pay them off, if possible. Liens and judgments to take care of includes mechanic liens and civil judgments. It's a good idea to check with your county's clerk of courts to see if anything is listed in their databases for yourself and for your business. In addition to running a credit check, a bonding company may also run a background check for liens and judgments against you at the courthouse. Therefore, even if you don't think there's anything there, check anyhow! 

Fix negative credit issues 

The bonding company will run a credit check, so you'll want to be sure to resolve any negative credit issues as much as possible. Obtain your business's credit report, and study it judiciously. If you've already gone through the process of getting audited by Dun & Bradstreet to be a government contractor, you can use that report to study your business's credit history. If not, obtain credit reports from any or all of the credit bureaus. Go through the list of negative items, and resolve as many of them as you can, particularly if you find incorrect information that is damaging your credit rating. 

Gather documents & proof of poor credit score causes

If your credit rating is still poor after resolving as many issues and items as possible, it doesn't mean you won't have a chance to get bonded. There are bonding services available that are willing to consider negative life events as causes of poor credit ratings. For example, if you were hospitalized for an extensive period of time or your place of business burned to the ground, which caused your credit rating to drop, a bonding service may take that into consideration. Therefore, if you went through a life event that caused irreparable damage to your credit rating, gather documentation to prove it. 

Provide proof of fiscal viability

Another thing a bonding service will consider is the viability of your business. Ultimately, your financial performance shows proof of your viability. The Dun & Bradstreet report will be substantial proof your fiscal viability as a business at the time the report was processed. After the date of this report, keep your financial records updated so they are readily available to show the bonding service, along with your bank statements and statements for any bank line(s) of credit your business may have.

It's important to note that your financial performance depends largely on your experience and the experience of each of your employees. Therefore, gather documentation showing that you and your employees have experience in fulfilling orders that are comparable to the government contracts you will be seeking. Proof of experience can include datasheets regarding previously filled orders, educational credentials, and/or positive news articles that may have been printed regarding your business. 

To learn more, contact a company that offers contractor bond services, such as Service Insurance Company.