5 reasons to maintain a good business credit score

Nic Gidaracos - 21 May, 2020

We share 5 key reasons to work towards or maintain a good company credit score. We also share some simple ways to achieve this. Credit Scores help you:

1) Access finance & insurance

Many businesses need access to finance to start, run or grow. As a new business or start-up having a credit score is impractical, as there is no track record to base a score on. However, to maintain healthy cash flow or grow once established, short and long-term forms of finance are key to sustaining a healthy going concern. 

Short-term finance in the form of trade credit, overdrafts or invoice finance, almost always rely on a sensible assessment of the creditworthiness of the recipient of that facility. Meaning that a good credit score is vital.

Similarly insurance, such as trade credit insurance - which is used to provide cover on business to business trade receivables and invoice finance - is only provided to businesses deemed as safe or trading safely.

2) Do more business

Many businesses will have a credit control function and even if this is not formalised, most will choose to do trade with companies that are well regarded. If business is not being initiated through a trusted introduction, then a healthy credit score helps provide credibility at the early stages and can prove vital in securing good terms too.

3) Maintain good cash flow

Good cash management within a business can be the difference between thriving and surviving. As alluded to above, securing good terms on the back of a good credit score is a very important step to maintaining good cash flow. By securing good trade credit terms, more money remains in your business for longer and helps you build your reputation further.

4) Enhance your reputation

By building a good credit score over time, doing more business and employing sound cash management practices, you build and enhance your reputation over time. Your reputation is not simply how you are perceived by the businesses you trade with, but also by industry peers and the banks and other lenders that will finance your business over time. A good credit score supplements these ‘soft’ assessment markers with an independent rating of your business and creditworthiness.

5) Attract top talent

In the age of information, top talent is as likely to interview you as you are to interview them. One of the simplest ways to assess your standing as a business is to look up your credit score. Due diligence can come in many forms and from many places and to build a strong team, they need to believe in both your vision and fundamentals. A good credit score helps with the latter.

Simple ways to build a good credit score

Understanding why a good credit score is important, but knowing how to do the basics to get and maintain one is essential too. Some quick tips, as follows…

Pay on time, everytime and if you can’t ask for leeway in advance of the due date.

Share relevant information with lenders and suppliers and build links to associations, chambers and other professional bodies who can help establish your brand, provide insights on industry best practice and support you in unforeseen circumstances.

Avoid unnecessary conflict. Try and arbitrate if you ever enter a sticky situation. CCJs (county court judgments) brought against your business can negatively impact your score.

We’d be delighted if you signed up to our free credit scoring app – it’s a simple process and Credifolio is available on both the App Store and Google Play.