Poor credit ratings can have a direct impact on borrowing, working capital, trade terms and tendering. If a rating is low, it can immediately restrict access to funding, and in cases where funding is obtainable it can also have a negative impact on the rates and terms offered.
Many companies create credit scores and they each have their own system for doing it; for example, Experian and Dun & Bradstreet. This means that your business will have several credit scores and you won’t really know how any of them were calculated. However, there are some basic criteria that are used in developing all credit scores.
- Most credit scoring companies are linked to debt collection services, so they know who is and isn’t paying their bills.
- They gather publicly available information about your business from government departments and banks.
- Someone may report you to a credit scoring company if they’re not happy with how fast you pay.
Your credit score might be on a scale of 1–5 or 1–100. The higher your score, the better you are at paying.
If your company is looking to borrow money, an optimised credit rating can really enhance the funding process, ensuring you can access the best deals available. This would include not only bank loans but also finance agreements for asset purchases. For finance brokers, this solution can directly support getting complex or difficult deals across the line by improving the company credit score first and can also convert credit declines into fundable deals. Your business credit profiles can also affect your supplier terms, your ability to tender for work and more.
Whilst many individuals will be able to tell you their current Experian credit score, very few business owners have any idea of how their company is faring in this respect. Needless to say, finding out just where your business currently stands would be a great starting point.
Friends of EBA, Lightbulb Credit, have worked with several of our clients to improve their corporate credit scores. The starting point is for them to run a free report for the client, showing them exactly where the ratings currently stand. They then offer a paid-for service to take steps to improve the credit scores – often with quite dramatic effects.
You really should ask Lightbulb to run a free report for you. Alternatively, contact EBA and we’ll do an introduction for you.
