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Does my company have a credit score and how can I improve it?
How can I check my business credit score?
Limited companies do have credit scores and they’re used for a similar purpose as individual credit ratings. Lenders use them as a guide to creditworthiness, but a business credit score is also useful for suppliers and investors to gain insight into your company’s financial situation.
Essentially, they’re a tool that facilitates borrowing and business growth, which makes them an important element of your company profile. You can build up a strong credit score by making loan and regular bill payments in full and on time.
Long-term, this demonstrates financial stability and reliability and helps potential stakeholders to view your business positively.
What is a good company credit score?
Company credit scores typically range from 0 to 100, with 100 being the highest level of creditworthiness. These scores indicate to lenders the risk of default that you present to them:
- 0-40: high risk
- 41-79: medium risk
- 80-100: low risk
Lenders will look at your history of repayment, how long you’ve been in business, your industry, and other factors before making a lending decision, so why is having a good company credit score so important?
A good credit rating can protect your business during times of economic uncertainty, allowing you to access the investment or borrowing you need. So if your company credit score is currently in the low or medium range, what can you do to improve it?
How to improve your business credit score
Pay bills early or on time
This is key to building a high credit score as it shows the business can pay what it owes – a crucial consideration for lenders.
Credit utilisation
Credit utilisation is the amount of credit you use in relation to the total available to you, and keeping this to around 30 per cent demonstrates financial responsibility.
File your accounts on time
If you’re late filing your company accounts or paying your tax bills it could indicate that there’s a financial issue with the business, even if this isn’t the case.
Limit your loan applications
Making multiple loan applications in a short timeframe will trigger ‘hard searches’ by lenders and can seriously damage your business credit rating. It’s advisable to seek assistance from an experienced commercial finance broker before applying as they can guide you towards the best form of borrowing without it affecting your credit score.
Finance options that don’t rely on your business credit score
There are funding options available that aren’t reliant on a good credit score, such as invoice finance, which can be ideal for businesses with a healthy sales ledger. If you’re in the construction industry, supply chain finance can also help as it’s based on larger contractors’ creditworthiness.
UK Business Finance highly experienced commercial finance brokers and can provide further guidance on how to build a company credit score. We can also advise you on the most suitable form of lending for your needs – please get in touch to arrange a free consultation.
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Matt Cluer
Finance Expert
Matthew has over 15 years’ experience of working alongside businesses across the UK supporting directors, shareholders, and key stakeholders. At UKBF Matthew works tirelessly to secure the funding companies need when they need it. Adept at raising finance through invoice and asset-based lending, crowdfunding, loan and equity funds as well as Government schemes, Matthew is perfectly placed to help your business access the funding required whether for general working capital, or to embark upon an ambitious growth and expansion project.
Top Finance Tips
We work across a wide range of sectors throughout the UK, providing specialist advice to each sector.
Why use a commercial finance broker?
A commercial finance broker plays an important role for businesses looking for funding. They can source the most suitable types of finance using a whole-of-market search strategy whilst also accessing the best deals and lenders.
What are cash flow forecasts and why are these important when obtaining business funding?
Operating with positive cash flow helps your business to pay its bills, conduct day-to-day trade with minimal issues, and plan confidently for the months and years ahead. But how do you know that there will be sufficient cash available when it’s needed?
Good debt vs Bad debt
Managed well, debt can improve your credit rating, enable expansion, and stabilise cash flow. It’s the backbone of growth but with so many different types of borrowing now available, it’s important for your business to carry ‘good debt’ rather than ‘bad debt.’
How to best prepare my company for a finance application
When preparing your company for a finance application, it’s key to present the business in its best light whilst also providing realistic projections, your plans for the funding, and how it will help the business grow.