Although most people know that credit reference agencies gather data on everyone, most business owners need to be made aware that the same agencies examine the credibility of the companies. The fact that your company has its credit score is a sign that you’re already ahead of a lot of UK-based small businesses.
A solid business credit rating is crucial if your SME succeeds. It’s not only affecting your ability to secure the most favourable offers from your suppliers. Still, it could hinder getting the financing your business requires to meet its goals. But, with an ever-growing list of things to do, it’s easy for business leaders to overlook the significance of credit ratings and their effect on your business.
In the same way, focusing on financial responsibility is vital for any business looking to build a good image with its clients, lenders, and suppliers.
The best part, however, is that improving your company’s credit score can be easy. There are a few simple steps that you can implement:
1. Check your company’s credit score frequently
Experian research discovered that almost three out of five SMEs had never examined their commercial credit score. In addition, of those who did check their score, nearly half (56pc) have failed to check it in the past six months. It’s even more alarming that only 13 per cent of people can determine all the significant factors that impact a company’s credit score.
It may be surprising that so many companies don’t check their credit score regularly or at all times, but it’s not when you consider that most of them need to learn what their business credit score signifies.
The ability to access and view your company’s credit score is typically an expense from the business credit file business. You can buy individual reports that provide surface information about the credit score for your small business, and company credit reports are advised regardless of whether or not you are planning to seek financing. Awareness of your credit score and regularly checking it is a crucial aspect of managing a company that is in a healthy financial position.
2. Invest in insight
There are numerous tools businesses can use to understand their current financial position. When you use this type of information, you’ll be capable of staying one step ahead of your competitors and dealing with negative impacts on your credit score before they become a problem.
Tools like My Business Profile enable you to assess and improve your credit score by sending out automatic alerts whenever there are significant changes to your business’s credit score. By allowing yourself to be proactive and proactive, you stand a greater chance of reducing the harm to your business credit score over the long term.
This tool is handy for small-sized businesses trying to borrow funds from outside sources because it will show what lenders look at when deciding your company’s creditworthiness. This allows the business owner to correct any negatives in their reports so that their business loan application is more likely to be accepted.
3. Pay on time and always
Late payments are an issue for the entire industry. The latest research from BACS found that 43 per cent of SMEs were hit by late payments this year. According to estimates, late payments caused by UK companies have caused SMEs an estimated PS13 billion, and that figure shows no indication of a reduction anytime soon.
If one supplier is late in paying and is late, it affects the entire supply chain. Therefore in the event of not paying promptly could cause harm to your business over the long term.
If you’re concerned about your credit score for business, it is essential to pay on time, as late payments can affect your credit score. It could take a long time to get back to normal when you repeat the same error.
Credit reference agencies provide information about your company that contains all financial information. This includes information regarding payment defaults and the unpaid County Court Judgements (CCJs) or court orders that may be issued in the name of a borrower if they do not make payments on a loan. One default can affect your score on commercial transactions, and the information will be on your company’s records for a minimum period of six years.
4 – Share information with pertinent parties
It is crucial to ensure that you’re proactive and share your details with credit reference companies. One of the main things credit reference agencies do is to verify every aspect of your company’s record, so ensuring that the information on your record is frequently accurate is crucial.
5 – Do your due diligence
Your business’s credit score is independent of your performance and the performance of the companies you collaborate with. It is, therefore, an excellent idea to keep track of the credit standings for both suppliers and your customers. A situation that originates internally can harm your credit score, for instance, if a company you trust goes into administration.
6 – Take the time to learn about yourself
The importance of education is paramount in the context of credit scores. Many business directors and owners need to know how their commercial credit score is calculated. It is crucial to ensure you’ve checked your company’s credit score lately and be aware of the process by which credit reference agencies come up with the number. Many aspects are involved in this, for instance:
- Any balances that remain unpaid
- The number of trade experience your company has
- The usual payment practices of your company
- How does your business use credit
- Patterns and trends were created over time
- Information on County Court Judgments
While it is not the top priority, making sure that your company can establish a solid credit rating is crucial to the success of your business. It will help you stand in an excellent position to obtain more funding shortly.
