What is a business credit score?
Your business credit score is used to measure how creditworthy your business is. It shows a lender how much of a risk it would be to lend your business money.
How does the business credit score work?
The higher you score, the more likely it is that your business can pay back any debt. For example, the repayments on a loan. When a lender considers your business creditworthy on the basis of your credit score, they feel comfortable lending to your business.
A credit agency, like Experian for example, gives your business a score between 0 and 100 using the Commercial Delphi scale. A score of 2 to 15 is considered maximum risk, 51 to 80 is considered below average risk and 81 to 90 is considered low risk. Alongside your credit score, agencies will also recommend the maximum amount of funding a lender should offer your business.
What are the benefits of a better credit score?
Your credit score is a measure of the financial health of your business. Not only does it show your financial position today, but it can be the difference between a healthy and unhealthy position in the future. A better credit score will open the door to:
✔️Easier access to more funding on better terms
✔️Winning new customers or strengthening existing relationships
✔️Increased work capital
✔️Improved credit terms with suppliers
How could a credit score of under 30 impact your business?
Getting funding approval will be difficult, suppliers won’t be able to offer you trade credit, potential customers will be less likely to do business with you.
How could a credit score of under 50 impact your business?
You will pay more funding and suppliers might be hesitant to offer you trade credit because they will pay more on their insurance.
How could a credit score of under 70 impact your business?
You would miss out on the best funding rates.
Why is your personal credit score important to your business?
Poor personal credit can be a big barrier to getting finance for your business. You may think the two separate, but in fact when lenders are checking the personal credit of the management team, what they are really asking is, ‘how do the people who run this business manage their debt obligations?’
With this approach, you can see how important personal credit scoring can be to a business finance application, especially if some shareholders are signing personal guarantees as part of the agreement.
If your application is declined based on personal credit history, there are steps you can take to improve your score and give yourself a better chance next time around. Even if you are approved for funding, this is still important, as the personal credit score of the main shareholders are a key factor when determining what interest rate is applied to the loan.
How do I find my credit score?
There are three main credit bureaus operating within the UK. You will have a credit record with all three providers, and different commercial lenders use different bureaus in their underwriting process. These bureaus are Equifax, Experian & TransUnion. One person can have a great score on Equifax, but a poor score on Experian and TransUnion, because those bureaus have access to differing data. Therefore, it’s important to have visibility on all three! The three websites below will allow you to check on your scores with these bureaus, as well as offer you hints and tips on how to improve your score. It could be something as simple as updating your address, or getting on the electoral Roll. It could also be that you have a default that you were unaware of, or even that there is a CCJ that is wrongfully applied to you.
We are not associated with these companies, we are merely suggesting that you use them as a free, quick method to check your credit score. The sites are credit brokers and may offer you personal finance after revealing your score. We do not receive any commission or any other benefits if you choose to proceed with an offer.
Credit improvement is a great option for your business if:
• Your credit score doesn’t reflect the creditworthiness of your business
• A supplier has reduced their terms because your score has been downgraded
• You need a better credit score to access funding or improve terms
• A lack of working capital is slowing the growth of your business
• There are outstanding or resolved CCJs noted on your business credit profile
• Your application for funding has been declined because of poor credit
What do I do next?
Our partners Capitalise, can help clients get better access to funding, lower interest rates and more favourable terms. Business credit rating has a direct impact on working capital, credit limits with suppliers, funding availability, rates, and tender opportunities.
If you are interested in seeing how your business credit score could be improved, please get in touch with us. A member of our extended team at Capitalise will then arrange a call to discuss what they can do for you and provide you with a detailed report of your credit rating across the 5 main agencies.
Just to be clear, there is no cost involved for the initial stages. If there is something to be done and you would like work to be carried out to improve your credit score, then Capitalise would discuss costs with you.
You can email email@example.com or call 01638 778487