Business credit: know the score

A low company credit score means you're going to pay more for certain business essentials. Many suppliers will insist on running a credit check on you or your business before deciding what price to offer or whether they need to take a 'security deposit'.

Lenders, landlords, fleets, telecoms providers, energy companies - they'll all want to know your score. The best deals for buying business gas and electricity, for example are reserved for those with a score above 40 or 50. Rightly or wrongly, this means around a third of businesses (arguably those that need it most) are being denied access to the cheapest rates.

We asked our customers how much they knew about their score. Over half (56%) couldn't tell us theirs and, more worryingly, 12% didn't even know they had one. Only a third (32%) understood what factors can affect their score and that it determines their eligibility for, not just finance, but access to some goods and services.

So for the uninitiated… your business credit score is a number that indicates how likely your business is to fail in the next year. Your business is scored on a scale of 1 to 100 and, the higher the number, the less likely it's considered your business will fail. It's a common misconception that every business has a fixed credit score that's referred to by credit lenders.

In reality, every credit lender has their own set of rules that they use to determine your credit score, so it can vary. For a small fee, you can request your statutory credit report from any of the main credit agencies such as Experian, Equifax and Credit Call. If you find any mistakes in the report, the credit agency will change it for free if you can provide evidence that it's incorrect.

There are certain things you can do to improve your score too - such as always paying your bills on time. Another tip is not to make multiple applications for credit. Every time you apply for credit, the lender you apply to will check your credit report, leaving a 'footprint' that other lenders can see. These footprints may indicate that your business is struggling financially and signals that you represent a higher risk. Try to hedge your bets and only apply for credit with lenders who are most likely to approve you - brokers can often recommend the lenders most suited to your financial situation.

Suppliers are entitled to protect themselves from bad debt but to discriminate against a third of businesses is taking a sledgehammer to crack a nut that hurts those most in need of cheaper deals. Instead we'd like to see better management of debt through customer services liaison and incentives for those that realise the importance of paying on time.

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The fastest way to increase profits is by slashing costs. Find out how you could cut your utility bills by calling Make It Cheaper for a free consultation - it only takes a few minutes but could save your business thousands.

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