A business credit score is a key gauge of financial health and it plays a huge role in determining future financing prospects. A credit agency will assess payment history, level of debt, company structure (e.g. limited or sole trader) and any public records (such as CCJ’s). A score is then generated which a lender will assess to gauge the risk associated with offering business finance.
In simple terms:
- A strong credit score will help to secure better interest rates, higher loan amounts and access to unsecured loans and overdrafts.
- A weak credit score will offer reduced options, increase costs and can result in loan applications being declined.
There are several steps a business can take to maintain a good credit score:
- Significantly reduce debtor days and late payments
- Keep debt levels reasonable and avoid over-leverage
- Maintain accurate, timely financial records and bank statements
- If still trading as a sole trader consider structuring as a limited company, this often improves credibility with lenders
- File accounts and confirmation statements on time
The best advice is to be proactive:
Regularly check the businesses credit report, address any discrepancies promptly, and monitor for changes. If previous credit issues have been faced, a business should be upfront with lenders about these problems and how they were resolved. Finally, always pay creditors on time, not least of which HMRC.
Remember a business credit score isn’t just a number, it’s a key that can either open or close doors to funding. A strong score enhances good borrowing power and helps secure more favourable terms, while a weak one can limit the available options. Taking proactive steps to build and maintain a healthy credit profile will make all the difference when it’s time to secure finance for growth.
Looking for a little help with business finance? Call our team on 01993 706403 or e-mail enquiries@ngifinance.co.uk.