What’s a good business credit score?
Running your own small business means wearing a lot of different hats. You have to define the strategic course of the company. Deal with clients and suppliers. Manage your staff. And keep on top of your finances. But is monitoring your credit score also on your to-do list?
Knowing your business credit score helps you keep your business financially healthy. We explain how your credit score is rated and what you can do to improve this score.
Understanding the impact of your business credit score
As a small business, there will be times when you need to borrow money, or agree credit terms with your suppliers. You may want to take out a business loan, or negotiate a bank overdraft. Or you might want to secure improved credit with a supplier. But to do this, you need to be creditworthy – so lenders and suppliers know you can repay them
This is where your credit score comes in:
What’s a business credit score? – a business credit score measures the risk of lending to you. It’s a rating that’s generated by the major credit reference agencies, like Experian. The credit score is used by banks, creditors, suppliers and customers so they can make a well-informed decision about whether to trade with you.
What’s a GOOD business credit score? – different agencies use their own scales. For Experian, business credit scores range from 0 to 100. The higher the credit score, the better your financial position as a business is seen to be. For example, a score of 2 to 15 = maximum risk, 51 to 80 = below average risk and 81 to 90 = low risk. Take a look at the Commercial Delphi Score table to see the full list of credit ratings.
Which factors influence your credit score? – your company’s credit score provides a snapshot of your business’ financial health. It’s influenced by a number of factors. Your industry type (listed on Companies House as a ‘SIC’ code) can influence your score. Your past payment performance can have an impact. Having active County Court Judgements (CCJs), filing your accounts late, or having high levels of debt can all have an effect too. It’s complex, but there are ways to understand these impacts.
The positive benefits of knowing your credit score – using credit tools, it’s possible to view the credit history of your business. This means that potential suppliers, business partners, or even competitors, can see your credit score. Knowing your credit score can influence whether customers and suppliers want to work with you. So, monitoring your business credit score – and being proactive about improving it – can help you improve your access to funding and trade credit.
The value of credit improvement for your business
Credit improvement helps your business build a better credit score.
Repair the areas that are holding back your creditworthiness, and you’ll give your credit score a boost. This means better access to funding. Lower interest rates on loans you take out. And improved terms on your trade credit. With better funding and more money in the business, you’re free to drive your future growth – and that’s good news for any business owner.
Find out more about your business credit score at Capitalise.com