Company credit checks to streamline your due diligence

Every business decision carries some level of risk. Whether you’re taking on a new customer, choosing a supplier, entering a partnership, or extending credit, the quality of your decision often comes down to how well you understand the other party. That’s where due diligence comes in. And for most businesses, company credit checks are one of the simplest and most effective ways to make due diligence faster, more consistent, and more reliable. Used well, credit checks help you protect cash flow, avoid bad debts, and build stronger commercial relationships based on facts rather than assumptions.

What is due diligence?

Due diligence is the process of checking a business before entering into a financial or contractual relationship with them. In practical terms, it means confirming that a company is legitimate, financially stable, and capable of meeting its obligations. For business owners, due diligence isn’t about distrust. It’s about reducing uncertainty. It helps you spot warning signs early, such as financial distress or legal issues, before they have a direct impact on your own business. Good due diligence supports:

• Safer decisions when extending credit

• More confidence when signing contracts

• Stronger long term stability

Without it, businesses often rely on gut instinct or incomplete information, which can lead to avoidable losses.

What are company credit checks?

A company credit check gives you access to another business’s credit profile, helping you assess their financial health and reliability. It brings together key data points that show how a business operates financially and how it has behaved in the past. When you credit check a company, you will be able to see their:

• Business credit score

• Payment performance and trends

• Credit limits and risk indicators

• Legal notices such as CCJs or Gazette Notices

• Company and director information

In the UK, this data is compiled by Credit Reference Agencies such as Experian, using information from public records like Companies House.The result is an objective view of how likely a business is to pay on time and meet its commitments.

How company credit checks streamline due diligence

Credit checks allow you to move from reactive decision-making to a more structured, consistent approach to risk.

Identify risks early

Credit checks highlight red flags such as County Court Judgments (CCJs), Gazette Notices, or winding-up petitions. These signals often indicate financial stress or the early stages of insolvency. Seeing these issues upfront helps you avoid entering relationships that could damage your cash flow or reputation.

Make better informed decisions

Rather than relying on assumptions, credit checks give you clear data to guide decisions around:

• Whether to work with a business at all

• How much credit to extend

• What payment terms to offer

This allows you to set terms that reflect actual risk, not guesswork.

Protect your cash flow

Late payment is one of the biggest pressures on small businesses. Credit checks show how a company has paid others, giving you insight into the likelihood of being paid on time. This helps you reduce exposure to slow payers and keep working capital moving.

Strengthen supplier relationships

Due diligence isn’t only for customers. Checking suppliers can help you understand their financial stability and reduce the risk of supply chain disruption. Working with financially resilient suppliers supports continuity, trust, and smoother operations.

Reduce bad debt exposure

Unpaid invoices don’t just affect profits, they consume time and management focus. Regularly reviewing customer credit profiles allows you to:

• Spot rising risk early

• Adjust terms before debts escalate

• Avoid extending further credit to struggling businesses

This proactive approach significantly reduces the risk of bad debts.

When enhanced due diligence is needed

In some situations, standard credit checks aren’t enough. Enhanced due diligence may be required where there are:

• Large or unusual transactions

• Complex ownership structures

• Links to higher risk jurisdictions

• Regulatory obligations under financial crime legislation

Enhanced due diligence involves identifying beneficial owners, understanding sources of funds, and carrying out deeper background checks in line with the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017. For most businesses, enhanced due diligence complements rather than replaces credit checks, creating a fuller picture of who you are doing business with.

Get clearer insight for stronger due diligence decisions

With a Capitalise account, you can make smarter, faster decisions by giving them clear visibility of credit risk across the companies they work with. With Capitalise, you can:

• Instantly check Experian business credit scores

• Review customers, suppliers, and partners in seconds

• Monitor companies over time and receive alerts when key changes occur

This means you can spot potential risks earlier, set appropriate credit terms with confidence, and avoid being caught off guard by sudden changes in a company’s financial position. By making credit checks part of everyday decision making, due diligence becomes a practical tool for protecting cash flow rather than a one off exercise.