Running an SME is a complex financial balancing act. Whether you’re just starting out or seeking to expand established operations, you need to make every pound count. Whatever you do, don’t crash your credit rating! Here are three easy ways to keep your business credit rating healthy.
1. Realise your SME has a credit score
Your business is an entity in its own right, and it has a credit score that can go up or down, just like a person. Agencies that collect credit-rating data on individuals also collect this data on companies. Keep on top of your SME’s credit score or you may find your financing options limited, or good deals closed off to you. You can purchase a one-off report from one of the various agencies, such as Experian, and you should do this at least once a year. It will give you an idea of how your business is viewed by lenders, and allow you to tackle problem areas.
2. The caring company shares (information)
Credit Reference Agencies (CRAs) need information about your business to score you effectively. Their role is to validate the information on your business record to make it easier for lenders to make decisions. It is in your interest to check it regularly, to make sure it is up to date. CRAs also hold information on who you do business with. Check out your suppliers and customers and make sure their credit rating is also good. Their poor credit history could be harmful to your own company score.
3. Don’t delay – pay straight away!
A missed direct debit or an outstanding invoice that needs to be followed up will look bad on your credit report. Beyond that, if you pay late, you pass the problem on to your suppliers, creating a vicious circle of small businesses struggling. Figures released in November 2019 by Pay UK, which runs the BACS direct debit and direct credit payment services, shows late payment debt among UK SMEs had risen to £23.4bn in the last year. It costs British SMEs £4.4bn each year to collect money they’re owed, with 54 percent of British SMEs suffering overdue payments. Of those, 35 percent get into further debt to operate. Repeatedly missing payments can lead to a poor credit score and County Court Judgements putting off lenders. This information stays on your financial record for six years.
Business credit rating – where to find out more
Tower Leasing have supported the investment and growth of over 40,000 SMEs. No matter what your plans are, we have the business finance products in place and the expertise to help you see them through. Find out more about our business finance solutions here or get in touch to find out how we can help you finance business expansion or a business loan.
Image: Credit Score Types by cafecredit licensed under Creative Commons 4.0
