Historically used mainly by banks and potential lenders before advancing finance facilities, business credit scores are becoming increasingly important as more trading companies are using them. Savvy businesses will check them out before they decide whether to work with a new customer, joint venture partner or supplier, in fact anyone they are intending to trade with.
This article discusses why a poor score could be harming your relationship with new customers or suppliers. Also, what you can do about it if your score is lower than you were expecting or hoping.
Why are business credit scores important?
Similar to a personal one, a business credit score is a number which is calculated by a credit reference agency after combining many pieces of known financial data about a company.
It signals to potential lenders or trading partners your business’ health. Factors such as how promptly you pay your bills, the business’ age and any legal notices registered like CCJs have a big impact here, and show what kind of a customer or partner you’d be from a financial standpoint.
Why would my customers care what my business credit score is?
If you wanted to give a new company your business and pay them for those services, you’d want to make sure that the company was in a position to deliver your goods for the foreseeable future. This is especially true if you have ‘trade secrets’ or unique specifications which you will need to share.
In this economy when lots of businesses are struggling financially, it’s particularly important for companies to check the stability of a company before they agree to any contracts. As declines can move quite fast, simply relying on past reputations is no longer a commercially sensible approach.
So you need to be aware that your potential customers may be also checking you out.
This can happen without you even knowing about it, or before they even make an approach for a quote or a request for you to tender. When they have run a company credit check, they may not even approach you and may have no idea that you’ve just missed out on a potential new customer.
Therefore, it’s worth checking that your score is as strong as it can be at all times, so you can present the strongest picture of your financial health.
Are business credit scores always up to date?
Business credit scores for smaller companies typically only get updated when there is a new event, such as your accounts being filed at Companies House. By the time these are filed, the financial results they are reporting can be quite old, so they may not reflect the current reality of your business.
What can I do if my business credit report doesn’t reflect how I’m really doing?
Capitalise offers businesses the opportunity to have their credit score reassessed and manually reviewed. We call this the Credit Review Service.
By confidentially sharing more information about your current trading position with the credit bureaus, they are able to recalculate your business credit score so it is up to date.
In 96% of cases* this results in a positive improvement. It’s worth noting that it usually only takes 36-72hrs to get a result and there can be no decrease in the previous credit score for companies who use this service.
Get started and use the Credit Review Service to give your business credit score a boost.
* actual results of CRS cases by Capitalise from January - October 2023