Good financial responsibility is important in establishing your business’s credentials with lenders and customers, says ELLA SUTTON
When operating a business of any type or size, and across all industries, company credit information is vital. It can affect our ability to be accepted for a loan, as well as being taken into consideration when dealing with other companies, or competing with them during a tender process. On a business credit report, the credit score, in particular, is of great significance.
With around 45% of small business owners being unaware as to the existence of their business credit score, now is the time to get to know exactly what these reports entail and why monitoring them is highly beneficial.
Business credit scores
The majority of us know that we have an individual credit score, which is regularly taken into account when applying for loans or taking out contracts. Business credit ratings work in much the same way and are used as a means to determine if the company in question is good or bad at handling their financial responsibilities.
Carrying out comprehensive company checks is a wise move before ever dealing with a business, as it allows you to deduce whether they are responsible, trustworthy and thus will make a good future business partner or a loan candidate. As such, lenders, investors and other companies will use the information found within your business credit report to decide if they want to work with you.
There are plenty of UK agencies dealing with business credit reports, and each will have their own rating calculation methods. The score typically ranges from 0-100, with higher scores being better, as it means your business is less risky.
Much like our individual credit scores, there are several factors which can negatively impact our business credit scores too, including arrears, CCJs, unpaid credit and filing for bankruptcy. As such, it is extremely wise as a business to continue to practice good financial responsibility, so as to avoid a lower credit score that could continue to affect you in the long-term.
Credit monitoring is important
Since your credit report is one of the core elements that will be taken into consideration by banks, investors, loan providers and other businesses who you may wish to work with, it is important to continue monitoring your score for any important changes. Your credit rating determines the way others will perceive your business and plays a vital role in whether you will receive favourable loan terms, higher insurance premiums, and if people choose to deal with you at all.
Remember, as a business, anybody can request to view your credit rating, so it is extremely wise to understand the information that is currently held about your company. Business reports have a significant amount of detail, including your credit information, demographics, company directors, financial information and analytic scores – all of which paint a very detailed picture of your business.
The credit information provided often includes data about your company’s conduct, in terms of payments, trade experiences and trends over time. The financial information can show whether there have been any credit issues, such as CCJs. The demographics detail the size of the business and the years it has been in operation. Additionally, company director information can be found, which includes appointment history and conduct.
Taking all of these factors into consideration can help others decide whether you, as a business, are to be trusted, which is why it is essential to regularly monitor the credit information held about you. This allows those who run a business to quickly identify and rectify any errors or take proactive steps that could help them improve their business credit score.
This article is published under the terms of the DB Direct service
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