How to Improve Your Business Credit Rating

Mar 14, 2016 Blog  RainFin , SME

Businesses need finance. There is no escaping it. Unless you are in a convenient position with a goldmine of capital to support you; you are likely to need access to extra funds at some point on your business journey.

Anyone who is investing their money in you is going to want to know how likely it is that they will get their money back. If you have a notoriously unreliable friend, who often borrows money and is reluctant to pay back on time, how likely are you to lend them money next time they ask?

Credit agencies go through the same processes when they determine your credit rating – they look at your history of borrowing, your financial status, your assets and your liabilities.

If you are a young business with a relatively short credit history, or you have never borrowed money before – credit agencies do not have enough information on your borrowing habits to assess you fairly. Or, if you have found yourself in financial trouble in the past you may find that your mistakes are still affecting your credit.

But it’s not all bad news. Here’s how you can improve your businesses credit rating.

1. Register as a CIPC company

If you trade in your own name then your business is not considered an independent entity from you. By registering your business as a Public Company or Private Company it means that you can pay bills in the name of your business and obtain loans in the name of your business.

This is good practice for keeping your personal and business finances separate. It means that over time your business will build its own credit rating, independent from your own financial history.

2. Check your business credit report

Credit reports are not foolproof and there could be errors on yours. Credit agencies take many things into account, including your business size, your outstanding balances, your history of repayment, legal judgments and the volatility of your market. If any of these are listed incorrectly it could be affecting your credit score in a negative way.

If there are errors on your credit report you can have these resolved. This should improve your credit rating – so be certain to check for incorrect data regularly!

3. Make your payments prompt, or in advance

Paying your suppliers promptly will go some way to boosting your business credit score. If you regularly make large, on-time payments to suppliers, this should be recognised by credit agencies. Make sure these payments are being registered on your businesses credit rating.

5. Take out a business credit card

Using a business credit card, which you pay off in full and on time on a monthly basis is a fast and easy way of proving how creditworthy your business is. Not to mention, many credit card providers provide incentives for regular spending.

Be aware that if you miss payments or rack up a large amount of debt on your business credit card, this will damage your businesses credit score even further!

6. Pay off your debts

It may sound obvious, but it bears repeating. If you have too many business credit cards open with large debts this will be damaging your credit score. Reducing the balance on these accounts will have an immediate effect on your score.

A debt consolidation loan could give you the space you need to build a better credit score. RainFin have a unique credit scoring system that takes into account your business’ overall financial health and potential, not just your credit history.

To find out more about applying for a loan through the RainFin marketplace, visit our Business Page.

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