Getting credit where it is due: Knowing your business credit rating

However, the opposite holds true – businesses are in a climate where a healthy credit score is more critical than ever before to potential lenders, including banks.

Experian’s Managing Director for SME, UK & Ireland, Simon Streat, said: “It is now far more important for companies to actively manage and monitor their own business credit scores to be in the best possible position to secure credit, business loans, tenders or business services, so that they can expand their business.

“There are steps companies can take to ensure they build a healthy credit score, such as paying invoices on time and filing annual returns on time, for example. The small firms that deal with these credit issues proactively are likely to be the most robust and successful over the long-term and, crucially, form a strong backbone to the UK economy.” Streat added.

How to build a healthy credit score – there are a number of steps small businesses can take to build a healthy commercial credit score. They include:

Get a copy of your credit report and find out what your commercial credit score is.

Ensure it is an accurate representation of your circumstances. As the report is based on information from third party suppliers, it may highlight lingering issues with your business that you were not aware of or thought had been resolved.

Pay invoices on time. A worsening payment trend is a key indicator of a deteriorating cash position.

File annual returns and company accounts on time. Businesses with poor trading results tend to delay submitting their accounts. Late filing of accounts can be a sign of financial distress.

Avoid County Court Judgments (CCJ) where possible. However, if one does occur, ensure it is settled within the month. In stable economic conditions the incidence of one CCJ would not necessarily involve the withdrawing of credit lines, but it is more likely to have a greater impact in the current economic climate.

Owners of small or newly formed businesses should also keep an eye on their own personal finances. In cases where the financial data of a business is scarce, consumer data is a valuable indicator of the business’s likely commercial integrity. Subject to consent, lenders are able to consider the personal finances of a business’s directors or proprietors in commercial lending decisions, provided the company is independently owned and has fewer than four directors or proprietors.

Put your business on the map. Register with a credit reference agency or a directory, such as Yell or Thomsons. Make sure there is enough information about your business available, because if it falls below the radar then you could struggle to gain access to credit and services.