Understanding your credit score for business

For any business, be it a start-up or established business, understanding your credit score will prove beneficial. However, before exploring the benefits of how to improve your business credit score, let us explore what is a good credit score.

Generally, most scores range from 0-100. Your business’s credit spending and repayment history is what determines your credit score. If your business is relatively new, it may not even have a score yet.

As a general rule, a higher score is more favourable to lenders, suppliers offering credit terms and even to customers who are considering working with you.

As well as being a tool to help you secure the best investment opportunities for your business, it’s also essential for managing cash flow.

Prospective lender’s will assess your scores and ratings discussed above as they assess your application.

Read on to understand in greater detail the benefits to you.

understanding your credit score

Benefits of having a good business credit score:

  • Easier to qualify for a loan
  • More beneficial terms for loans – ie lower interest rates
  • Protects your personal credit score
  • Better terms offered by suppliers
  • Increased negotiating power

Ways to improve your business credit score

Pay your bills on time

Pay invoices to suppliers on time, not only will this go a long way to maintaining a healthy credit score, but it will also enhance your reputation and establish good relationships with business partners.

Keep debt levels low

Owing money to either your bank and/or additional lenders will affect your business credit score. So keep debt levels low whilst maintaining frequent re-payments. Always ensure you stay within your over-draft limit too!

Check your credit rating frequently

Make this a regular activity and rectify any mistakes.

Keep old accounts

Once accounts/loans are paid off, keep them open.

Avoid CCJs

Should you end up receiving one, ensure it is paid off as soon as possible.

Know your customers credit scores

Keeping track on customers credit scores will allow you to make informed decisions about what payment terms and/or amount of credit that you give them. If for any reason their financials change in a negative way, you can limit damage to your business by quickly working to recover any payments due to you.

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How we can help

Maintaining a healthy cash-flow in your business is key to ensuring business success. Where services or products are supplied giving customers 30 days payment terms, it is essential for your business health to ensure such invoices are paid on time.

Credit control is a key function for businesses who want to be paid on time.

Talk to us at FJCM so we can help you further on your journey to understanding your credit score and how we can work together to achieve the optimum business credit score for you.