Did you know your business has a credit score?
Just as you have a credit report, so does your business.
Credit ratings agencies log information around payment history, credit cards and loans and aggregate that information into a credit score for your business.
Your credit score will be taken into account, especially when you’re applying for any sort of unsecured finance – but it will come into play for finance of all types, often including credit accounts with suppliers.
There’s no free way to monitor your business credit score, Experian charge £25 per month to monitor it. You can sign up for a 30 day free trial though.
What the credit reference agencies look at.
What you can do about it...
If you’ve got a new business then much of this data will be lacking detail – not much you can do there but the better start you give your business the sooner the information the credit reference agencies have on it will improve.
So long as your finances are in order, the older your business becomes, the better your credit score will be.
For a new business you could consider getting your first year (or two) accounts filed early to increase the information available – that can make it easier for the credit reference agencies to assess you.
Directors or major shareholders with poor personal credit can bring down the business credit score.
Be honest with your fellow founders and if one of you has dissolved companies in their recent past then maybe keep them off the new business for a while.
If you use credit, then just the same as personal credit, use it wisely.
Only borrow what your can afford to repay, maintain the regular monthly instalments and don’t exceed any credit limits.
With online credit card servicing easily available you should always be on top of your spending and growth plans. Make sure your plans are both affordable and achievable.
Be realistic with yourselves when looking at future cash-flow.
None of us expected a global pandemic in 2019-20 but for businesses which have been closed down for months on end, it’s a tough reality.
Look at your customer base, which of them are secure, who might stop using you and either go to your competition or cease trading (or buying your product). What would happen to your business if you lost 10% of your trade for a couple of months? Or 20%?
Expansion plans – especially where people are involved, involve capital outlay before any profit is recouped. How long can you stand before the profits start rolling in?