As with private individuals, a business’ credit score is central to its ability to access credit and borrow money at a competitive rate. A simple ‘yes’ or ‘no’ could make all the difference to the success of your business and its ability to take advantage of external opportunities as and when they arise.
If your business has been refused credit in the past, there is every reason for you to be concerned about how your business looks to potential suppliers and lenders. If you take out a loan from a company like Everline, make sure you return it on time otherwise there could be consequences. In recent years, there has been a marked increase in the number of businesses using the services of free company checking websites to determine the financial stability of organisations they are considering working with. If your business represents a risky proposition on paper, there is every chance key suppliers and stakeholders will refuse the opportunity to work with you. Bad debt and late payments, particularly amongst SMEs, are a scourge businesses are desperately trying to avoid. So, with that in mind, how can you improve your credit score to make your business a more investable proposition? Always pay on time
The single most influential factor on your business’ credit profile is your past payment experiences with other businesses. It is imperative you pay invoices within the terms agreed with your suppliers, otherwise you can expect to see your credit score freefall as a result.
Receive the credit you deserve
Make sure every transaction you have with other business is accounted for on your credit report. If you are paying large sums over a prolonged period to a major supplier or lender, make sure the credit agencies know about it. After all, this is precisely the opportunity you need to increase your credit score and improve the perception of your business in the eyes of leading lenders. By checking your credit profile at least once a year, you can ensure all your payment relationships are accounted for.
Organise your personal finances
If you own a start-up or emerging business it is particularly important to keep your personal finances in order. In the early days the credit agencies will have little or no information to base lending decisions on, so rather than simply refuse your application, they may take a look at your personal credit history to establish a clearer picture about your approach to repayments.
Reduce your level of gearing
The more of your business’ capital structure comprised of external finance, the higher your level of gearing. For example, if you already have a loan valued at 50 percent of your business’ capital, you are less likely to find a creditor willing to lend you the money you need. On the other hand, if your business is financed solely from internal sources, creditors will have no problem lending you money, as long as you have developed a credit profile which illustrates your propensity to meet the repayment terms.
Take a look around
Some industries or sectors are traditionally more highly geared than others. In the technology sector for example, start-up costs are typically high. So, take a look at your competitors’ credit profiles. If they’re struggling in the early days too, perhaps it’s simply a symptom of your sector.
If you have been rejected by a potential supplier based on your credit profile then we’d love to hear from you. How did you overcome this set back? How did it affect your business? Please leave your comments below.
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