Your business credit score can influence more than your ability to borrow. It can affect how lenders view your business, the terms you’re offered and, in some cases, how other businesses choose to trade with you.
Lenders use credit information when assessing finance applications, but it can also be considered by suppliers when setting payment terms and by other businesses deciding whether to trade with you.
Alongside keeping an eye on profitability, cash flow and your balance sheet, your business credit profile is something worth understanding and looking after.
The good news is that there are practical steps you can take…
Make sure your business information is correct
Credit reference agencies use information from a range of sources, including Companies House. Filing your accounts and confirmation statements on time and making sure your company information is accurate therefore matters.
The amount of financial information available may also influence how a business is assessed. Filing accounts containing more financial detail can give credit reference agencies a clearer picture of the business than accounts containing only limited information.
Pay bills when they’re due
Your payment behaviour can contribute to your credit profile because some larger suppliers share payment information with credit reference agencies.
Regularly paying suppliers and other commitments on time helps demonstrate that your business manages its financial obligations well.
Good cash-flow forecasting and using direct debits where appropriate can also help prevent avoidable late payments.
Don’t wait until you need finance
One of the most useful things you can do is understand your credit position before you need to borrow.
This can be particularly important if you know investment is on the horizon. Making numerous finance applications in a short period can be interpreted as a sign that a business is struggling to obtain funding.
Checking eligibility and considering the most appropriate lenders before making formal applications can help avoid unnecessary searches.
Use credit responsibly
Having borrowing isn’t automatically detrimental to your credit profile.
A business credit card or other agreed facility that is sensibly managed can help demonstrate a track record of handling credit. The important points are making repayments on time, staying within agreed facilities and avoiding persistently high balances that could indicate financial pressure.
Deal with problems early
Errors happen, so regularly checking your business credit profile gives you an opportunity to identify incorrect information.
It’s equally important not to ignore genuine problems. Unpaid debts that escalate into legal action or County Court Judgments can have a significant impact on a company’s credit record.
Early conversations with suppliers, HMRC or other creditors can sometimes prevent a manageable cash-flow issue from becoming something much more serious.
Know where your business stands
Ultimately, the starting point is knowing how your business is viewed.
Understanding your credit score and the factors that influence it can help you identify potential issues before they become a barrier, particularly if future plans may involve external finance.
Our team can help you understand your credit position alongside your accounts and cash flow, and identify any practical steps worth considering, particularly if investment or borrowing forms part of your future plans.
