Someone is keeping score of how creditworthy your business is. When you approach a bank or other potential lender for a loan or credit card, one of the first things they will do is take a look at this score.
Fundamentally, the credit score is a measure of how likely it is that you’ll be able to repay the loan you’re looking for. If your firm’s credit score (typically measured on a scale of 0 to 100) isn’t good enough, you’ll be turned down. A higher score could see you being offered some or all of the finance you’re looking for, although you’re only going to get the best rates of interest if your credit score is very high.
Businesses that grow usually need to borrow in order to finance that growth. This means that if you’re serious about expanding your business, you’ll want to make sure your credit score is as high as it can be.
Your credit score is calculated by credit rating agencies. Each agency has its own score for your business, and each one calculates that score in a slightly different way. The details of the calculation are kept secret.
Some agencies will let you see your credit score for free while others charge a fee. If you haven’t already done so, you should consider finding out what your credit score is right now.
Many different factors go into the calculation of your credit score. These are likely to include:
If your credit score is lower than you want it to be, there's no quick route to pushing it up. Even if you have no plans to borrow money right now, it still pays to work towards improving your credit score. That way, it’ll be easier for you when the time comes that you do apply for a loan or other finance.
If you’re the business owner any application for credit could mean your personal credit score gets taken into account. This is particularly likely if the business is relatively new and has little credit history.
Your own credit score will be based on factors such as your home ownership status, whether you have a mortgage and how well you manage your credit cards, along with other indicators as to how you manage your money.
Working towards a strong personal credit score can help your business to secure the finance it needs.
It seems obvious that paying your commitments on time will send positive signals to the credit reference agencies that maintain credit scores. However, it’s easy to forget this when cashflow is tight and you can choose to hold payments back for a week or two.
Protecting your credit score is just one reason why cashflow planning is so important to your business. When you plan ahead you can see when you’ll need cash to cover invoices and bills, and you can take the necessary steps to ensure cash is available.
Where you have a positive payment history with a supplier, ask them whether you can open a credit account with them. Then be sure to make your payments on time, every time. This will send positive signals to credit rating agencies which will feed into your business credit score.
The credit rate agencies draw their information from many sources, including data that’s publicly available. Be proactive in keeping your business data up to date, including listings on business directories and in particular, your document filings with Companies House.
If you’re late in filing your published accounts and tax returns, this will have a negative impact on your credit score.
Your applications for loans, credit cards and other forms of business finance will be tracked by the credit reference agencies. While every approval will count in your favour, every refusal will do just the opposite.
If you’re filling in yet another online application in hope, rather than in confidence you’ll be approved, it may be worth speaking to someone who can give you some advice.
If you think your credit score is adversely affected by old debts that have since been paid, or by a mistake, or even if you want guidance on how to improve your score, get in touch with one or more of the leading credit agencies.
They should be able to help with fixing errors or problems in your credit record, or give suggestions for improving your credit score.
Whatever your business credit score, we may be able to help you raise the funds your business is looking for. Our team has worked with many business owners who need to overcome a poor credit history.
We work with a panel of over 250 lenders, some of whom are open to helping businesses with weaker credit scores.
To explore your opportunities for raising money for your business, whatever your credit score, get in touch with us today.