Over recent months, it has been clear to see how inflation, interest rates and the energy crisis have affected our clients and their businesses, and in particular, their cashflow. One proven way for business owners to tackle these issues is to work on improving their business credit score to demonstrate that they are trustworthy, credible, and financially healthy.
Cloud accounting expert Jill Morris, and partnership manager at Capitalise, Olivia Thomas, sat down to discuss business credit scores and how to boost your credit score in our latest blog.
What is a business credit score?
A business credit score is a measure of the financial credibility of your business, and is made up of various factors, including how much debt the business has, and most recently filed company accounts. Your business credit score allows lenders to understand the financial situation of a business and the level of financial risk involved in working with them. Having strong trade credit and supplier credit limits can help businesses secure investment and funding opportunities and negotiate better supplier terms.
Five tips to boost your business credit score
1. Pay on time
Paying on time, whether this be direct payments or paying off suppliers, will improve a business’ credit score, as well as demonstrate to potential investors that you can be trusted. Any missed payments can reduce your credit score and even lead to a County Court Judgement (CCJ) which could stay on your business’ account for six years – heavily impacting the ability to apply for credit.
2. Regularly check your credit score
Regularly check your business credit score to not only track progress and measure growth, but also review any missed payments, areas to improve and unusual transactions. PM+M offers access to Capitalise for Business, giving businesses a deeper insight into their score, and the ability to credit check customers.
3. Separate business and personal accounts
Keeping personal and business accounts separate is very important, allowing you to track your business’ progress more easily and avoid your business credit score being affected by any personal debt or missed payments in your personal account. Remember, it’s just as important to keep your personal accounts healthy and strong by paying your personal bills on time as these can affect your business credit score if you’re the director.
4. Avoid closing accounts
Business owners may be tempted to close an account and start again – however, closing an account will impact your business credit score, as any missed payments or negative credit will still be visible. Essentially, the longer a credit history is, the more a credit score will improve. Closing an account may actually hinder progress and even reduce your score.
5. Reduce the number of applications
When it comes to looking for funding, making too many applications in a short period of time can negatively impact your business credit score if the lender is conducting hard searches, and will still leave a trace on your credit profile if the lender is conducting soft searches. Multiple applications could also indicate to lenders and/or investors that the business could be struggling financially, which could lead to applications being denied, loss of investment, or high interest rates on any funding agreed. If you are looking to secure funding, speak to us to ensure you are approaching the right lenders, and avoiding damaging your credit score with too many applications.
Credit review service
Through our partnership with Capitalise, PM+M offer access to Capitalise for Business which gives businesses a deeper insight into their score and what’s impacting it, plus the ability to credit check their customers. As part of this, you can access the Credit Review Service which can help improve your business credit score and limit by providing more up to date financials for Experian to review. There is a guarantee that if your business credit score doesn’t improve whilst using the service, you get your money back.
Find out more by watching our recent webinar in partnership with Capitalise on managing your business credit score and mitigating risk to your cash flow – click here.
To hear more about how Capitalise for Business and their credit review service could help you, get in touch by emailing cloudaccounting@pmm.co.uk.
