When businesses apply for a loan or any alternative funding, a range of factors will be taken into consideration, but how often do businesses consider the effect their credit score might have on any decision?
According to a recent survey from Experian, not very. The study concluded that SME owners are generally not too clued-up on their business’ credit rating, with only about 13% of the decision-makers within companies demonstrating a thorough understanding of what can make their rating good or poor.
This is despite the rating of a company being pivotal in the decision as to whether it receives what it is looking for from lenders, and even bearing an influence on how satisfactorily business-to-business links can be formed, especially since individual checks can be performed online for a relatively low cost.
What affects a business credit score?
Most of this stands to reason and is not dissimilar to the factors that influence a personal credit rating. Consider how much you currently owe and whether you have a good record of making payments on time. Late payments are totted up and might affect the score negatively. Public records of bankruptcies, CCJs and arrears can only lead to a poorer score too.
Perhaps less often considered is the amount of time over which information has been available. Newly formed companies will struggle to dazzle with their score because they simply haven’t been around for long enough to have built up any kind of record. This makes it all the more important that finances are managed impeccably during these early years.
Improving a poor score
If your score is not as you hoped, the most important way to combat this is to ensure that your assets outweigh you liabilities. Refer to your balance sheet regularly, and don’t hesitate to ask for advice from a finance and accounting service.
Some companies will respond to a poor credit history by stopping borrowing, but bear in mind that this can be harmful to. The less often a company borrows, the more difficulty credit agencies have in determining whether or not they are able to manage credit. Keep borrowing, but do so sensibly and make repayments accurate and punctual.
Taking time out
Whether you are looking to improve your company credit score or maintain an already strong one, the first step is to ensure that you have excellent accountancy procedures in place. By outsourcing accounts to a reputable company, you can give yourself more free time to build your business while ensuring that your books and payments due are in capable and professional hands.