Business credit scores for hospitality businesses

If you run a restaurant, pub, cafe or hotel, your business credit score can affect whether suppliers extend payment terms, how quickly you can secure refurbishment or equipment finance, and whether a landlord will let you take on a new site without a large deposit. But your own credit score is only part of the picture. The suppliers, delivery platforms and events customers you depend on also carry credit risk. If one of them runs into financial trouble, you could be left without essential stock, waiting for money to reach your account, or covering the cost of a booking that never gets paid.

This guide explains what affects a hospitality business's credit score, how it can influence supplier terms, leases and funding, and how to check the credit risk of the businesses you rely on.

Why do credit scores matter for hospitality businesses?

Hospitality businesses often have to pay for food, drink and stock before they have sold it, while rent, wages and utilities still need to be paid during quieter periods. Much of your revenue, meanwhile, is settled on the same day through the till or a card payment. Of course, that doesn’t apply to every source of income. A delivery platform settles according to its own schedule, while a wedding, party or corporate function is usually billed after the event rather than paid for on the day. Your business credit score can therefore affect several important commercial relationships. Suppliers may check it before offering payment terms, landlords or letting agents may consider it when assessing a new site, and lenders can use it as part of a funding application.

How does your credit score affect supplier terms and getting a new lease?

When you apply for a trade account with a food, drink or equipment supplier, they may check your business credit score before deciding whether to offer payment terms rather than asking for payment on delivery. The same applies when you are looking for a new premises. A landlord or letting agent may check your credit profile before deciding whether you need a larger deposit or a personal guarantee.

A weaker score does not necessarily prevent you from opening a supplier account or taking on a new lease. However, you may be offered shorter payment terms, a lower credit limit or asked to provide additional security. A stronger score can support negotiations with suppliers, potentially helping you secure longer payment terms or a higher credit limit. It may also form part of a landlord's assessment of whether a personal guarantee or larger deposit is required. Before approaching a new supplier or applying for a new lease, it is worth checking your business credit score so you know what they will see.

How does your credit score affect funding for refurbishment, equipment and cash flow gaps?

When you need funding for a refurbishment, new kitchen equipment or to bridge a cash flow gap between quiet and busy trading, your business credit score can affect whether you can access finance, how much you can borrow and what it costs.

A strong business credit score can make it easier to access a wider range of lenders and finance options at more competitive rates. It can also give lenders greater confidence in your ability to repay, which may make it easier to secure funding quickly when you need to move before a busy season starts.

A weak credit score can have the opposite effect. You may have fewer lenders to choose from, face higher borrowing costs or be asked to provide additional security, such as a personal guarantee. This can make it harder or more expensive to fund a refurbishment or new equipment at exactly the point you need to act quickly.

How to build and protect your hospitality business's credit score

Once you know where your business stands, there are several steps you can take to strengthen your credit profile and protect it over time.

• Pay suppliers and HMRC on time. Payment history is one of the most important factors in your credit profile, so consistent, on time payments help protect your score

• File your accounts and confirmation statement on time. A late filing at Companies House is one of the most common reasons a score falls, so treat the deadline as fixed

• Keep your Companies House details up to date. An accurate registered address and current director information let agencies, suppliers and landlords match your trading activity to your file correctly

• Deal with any CCJ quickly. A satisfied judgment is viewed far more favourably than one left outstanding, and paying in full within a month can get it removed from the register entirely

• Keep overdraft and credit card use comfortably below your limit during quieter, off season months, rather than only when trade is strong

• Check your credit score regularly. Knowing what a supplier, landlord or lender is likely to see gives you the chance to fix a problem before it costs you a supplier account, a lease or a funding application

Why your suppliers, delivery platforms and events customers are a credit risk too

Your own credit score isn't the only one that matters. The suppliers you buy from, the delivery platforms you sell through, and the customers you host events for all carry credit risk of their own, which can affect you just as much. If you rely on a small number of suppliers for stock, their financial position matters as much as yours. If one becomes insolvent, you could be left without food or drink to serve at exactly the wrong moment, and perishable stock is harder to replace at short notice than most other goods.

Events create a different type of exposure. A wedding, Christmas party or corporate function may involve a deposit followed by an invoice for the balance. By the time that invoice is due, you may already have paid for the food, drink and staff needed to deliver the event.'ve already paid out, not something you can hold back until the invoice clears. Research commissioned by the Department for Business and Trade found that around 14,000 UK businesses close every year because of late payment, equivalent to around 38 businesses a day. For a hospitality business, late payment can leave you carrying costs that have already been incurred.

Delivery platforms create another consideration. If a large share of your revenue comes through one platform, its settlement schedule forms part of your cash flow. A delay or dispute can leave you covering the costs of orders you have already delivered.

How to credit check the suppliers, platforms and events customers you work with

A credit check can help you understand the financial position of a business before you agree terms or take on significant exposure. It is particularly useful when you are dealing with a new supplier, a large events customer or a platform that represents a substantial share of your revenue.

Running a company credit check takes seconds and gives you a credit score and suggested credit limit before you agree to any terms.

Common credit mistakes hospitality businesses make

• Only checking your own score once rather than monitoring it as seasonal trading and payments change

• Taking on a key food or drink supplier without checking their financial position first

• Extending credit terms to a corporate or events customer based on the relationship alone

• Relying on a single delivery platform for a large share of revenue without accounting for its settlement schedule in your cash flow

• Assuming a weak score automatically rules out a lease, supplier account or loan when there may be an opportunity to provide further evidence or a deposit instead

How Capitalise helps hospitality businesses manage credit risk

Managing credit risk means looking at both your own financial position and the businesses you rely on. When you sign up to Capitalise, you can check your own business credit profile, helping you understand how your business may appear to lenders and other companies before you apply for finance or enter into a new commercial relationship. You can also use Credit Risk Manager to check and monitor customers, suppliers, delivery platforms and other companies you work with. Rather than relying on a one off check, ongoing monitoring can help you see when a company's credit position changes, giving you information to consider when deciding whether the level of exposure still makes sense for your business.