How can I improve my company’s credit score?

Your company’s credit score works just like your personal credit score; the better it is, the easier it is to secure finance and the better the terms will be on that finance.

The size and terms of any financing you’re offered directly impact the amount you can invest in growing your business, so don’t limit your company by allowing its credit score to slip. On top of this, your customers may be checking your score to determine what credit terms to offer you, or even whether to engage with you at all.

On the flip side, it’s not all about your score and what you can get for it. It’s also about your customers’ credit scores, and even the scores of your key suppliers. If your customers are at risk of struggling to pay you, or your suppliers run into trouble, this will impact your own cash flow and supply chain, and, in turn, your credit score!

What can you do to improve your score?

• Ensure you have a surplus of cash or unused portion of overdraft
• Check your own customers’ credit scores and agree different terms for those with poorer scores or consider not transacting with them if you’re concerned about their ability to pay. Non-payment or late payment is a direct hit to your cash position.
• Get on top of your customers’ existing bad debts: speak with your customers to implement a payment plan or try using a debt recovery firm, though be mindful of any potentially negative commercial optics of doing so.
• Check key supplier credit scores; if they encounter issues, this may have a knock-on impact for you
• Pay your bills as promptly as you can, accepting the need to also manage your cash flow! Late payments, mean points of your credit score.
• If you’re a start-up, make sure your personal credit score is as strong as possible, lenders may take this into account if there’s limited credit history for your company.
• File full accounts on time at Companies House; more data for credit reference agencies may result in a better credit score. Bear in mind that credit reference agencies don’t always take into account filing extensions you may have agreed with Companies House. Where possible, therefore, stick to the original filing deadline.
• Ensure company details are up to date at Companies House; outdated information can hurt your score.
• Address your net liabilities: credit reference agencies and lenders want to see net assets, so if you’re sitting on net liabilities, take some action. Maybe that intercompany loan is never going to be repaid, and needs writing off or converting to equity (speak to your accountant or tax adviser before diving into material changes of this nature to ensure there are no negative consequences).
• Check and track your credit score: a worsening score month on month may indicate lurking issues in your business which, if identified early, can be remedied before it’s too late.
• Assess funding options without having a credit check: if you’re looking for funding, get quotes rather than offers. Each time you get a funding offer, a credit search has been made on your company. Too many searches will lead to a drop in your score.

If you’re looking for funding options without the need for lots of credit searches, or would like to better understand what you can do to improve your credit score, or perhaps you want to improve your cash flow – please talk to our team today.

We help businesses of all shapes and sizes get a handle on their finances, often with only a few simple steps, and our initial consultations are free. Let’s start a conversation!