Companies of all sizes rely on cash flow to stay in business and accessing funding at key moments can be vital to survival for operators across all sectors. But with small businesses around the world finding it painfully difficult to borrow money from traditional lenders, credit scores have come under increasing scrutiny as key elements in the business finance equation. Here are some tips on how a company credit score can be improved:
1 – Pay off your debts
Clearly, when cash flow is a real concern for your company, it might not be easy or even possible to pay off debts that are being left outstanding and accumulating interest. But, in the context of trying to improve your company’s credit score, paying off your debts to the extent that you’re able is very important indeed. Paying off older debts should be prioritised and you should generally aim to pay down any large debts that your company has if you’re keen to add flexibility to your financing situation.
2 – Pay your bills on time
Providers of credit reports are able to ascertain to a large extent just how prompt or otherwise your company is with its payments of debts and in the way it meets other financial obligations, such as utility bills or property rents. If you have a history of being less-than-prompt with bill payments or in the way your company deals financially with suppliers and trading partners then this could be counting against you as far as your credit score is concerned. So, if you’re aiming to make improvements in that regard, then routinely making payments on time is a good place to start.
3 – Check your info is entirely correct
There are instances in which major credit rating agencies, for one reason or another, have compiled information relating to your company that is inaccurate or outdated. In time, these discrepancies might be resolved or corrected automatically but it can also be well worth checking your details are entirely correct on a regular basis. Getting in touch with the major rating agencies directly on at least an annual basis can cut out the potential for any errors costing your company in terms of how your creditworthiness is categorised.How To Improve Your Business Credit Score Intelligenthq
4 – Limit the number of new accounts you open
Having multiple bank accounts or lines of credit open doesn’t necessarily have a huge impact on your company’s credit rating. However, it can be taken as a negative indicator if new accounts are regularly opened up on behalf of your organisation. The key here is to get advice from relevant experts who can help streamline your finances in ways that mean all issues are addressed and that processes are only as complex as they need to be. Having too many accounts open can confuse your company’s financial picture and, from a credit rating point of view, less is often more.
5 – Keep inactive accounts open Simplifying your company’s finances can be beneficial in a variety of ways when it comes to business accounting in general. But, when considered in the context of credit scores specifically, it is better to keep banking and credit accounts open even when they are rarely used or entirely dormant. This might seem somewhat counterintuitive but having long-standing records of financial activity of any sort can help rating agencies gain a stronger picture of your business. Therefore, keeping dormant accounts open can serve a purpose and potentially help improve your company’s credit score.
6 – Keep your eyes on the prize
It is easy to view credit rating agencies as the bad guys or to see your company’s credit scores as being unfair or unhelpful. But by retaining a focus on the importance of effective financial management, the associated issues are easier to address and significant improvements to your ratings can be made. It would be difficult to overstate the importance of achieving and maintaining a strong credit score in the context of small business finance. So going the extra mile in terms of financial diligence and accounting can make a massive difference when it comes to making your company more creditworthy and ultimately more profitable and competitive.
Emily Trant is Managing Director of Check Business, a technology start-up that helps SMEs solve the key business challenges of: getting paid, finding new customers, and raising finance. Emily has a successful track record of delivering growth and innovation in digital businesses, and loves getting under the skin of small business challenges. Originally from Canada, Emily has a degree in Economics from the University of British Columbia.