Businesses of all sizes often spend a lot of their time trying to find ways of raising cash and accessing finance.
The reason for that is simply that cash flow concerns can be enormously damaging and they might even mean the end for otherwise viable and vibrant companies. One issue that ought not to be overlooked in this context is your company credit score, which is what could be holding you back from accessing the finance you need if you're struggling to make progress.
Here are some tips on how to improve your company credit score and to help maximise your prospects of funding your business for the future.
1 – Check your info
One point of order that ought to be ticked off right away when it comes to your company credit score is to check and make sure that the details about your business are entirely accurate and up-to-date. It is possible that one or more credit rating agency has data about your company that is inaccurate and is hindering your efforts to access credit. Generally these issues will be resolved in time anyway but it is worth taking the time to check and see that your info is always as up to date as it can be.
2 – Prioritise your debts where you can
When your business is finding it difficult to maintain a steady cash flow and keep on top of financial matters more generally, it can be impossible to pay down any debts you have outstanding. But when and if the opportunity arises, it can really help your company credit score if you repay any notable portions of your debts.
It's tempting to temporarily ignore larger debts you have as you focus on trying to establish some basic financial flexibility in the short term. However, when it comes to credit scores, the larger debts still matter and should be addressed in any way possible.
Credit rating agencies include in their calculations a wide range of factors but one of them is how often or rarely your company is late in making payments to essential service providers. Basically, if you don't pay your utility or your internet bills on time each month than a dim view will be taken of that by rating agencies. The issue isn't necessarily the crucial factor when it comes to how your credit scores stack up but getting into good habits of paying all your bills on time wherever possible is always advisable.
4 – Keep inactive bank accounts open
You would be forgiven for thinking that the best thing to do with old and inactive bank accounts in your company's name would be to close them in the interest of simplifying your finances as much as possible. In fact though it is generally best to keep your oldest bank accounts open, even if they are rarely or never used. The reason for this is simply that credit rating agencies want to see financial details relating to your company stretching as far back as possible and a long history of any sort of activity can be beneficial to rating.
5 – Keep it simple
A general rule of thumb that can serve companies well when it comes to their credit scores is to keep it as simple as possible. Having a lengthy list of creditors and bank accounts can be taken as a negative indicator as far as credit scorers are concerned. Particularly if your company has a history of regularly opening more and more accounts or facilities as time goes on. So sticking to a smaller number to keep things simpler can help improve your rating over time.
6 – Keep at it
Trying to find credit or access finance can at times become an excruciating and an exasperating experience for companies of all sizes and in a full range of industry sectors. So much so in fact that directors might find themselves cursing credit rating companies who score them badly and hinder their efforts. Unfortunately, the only way to improve your credit score is to work hard at making progress in the right direction, which of course requires a good deal of persistence and a steady focus on the details that make a difference.
By Conrad Ford
Conrad is the founder of Check Business, which provides a range of online tools to help firms and their trusted advisers to manage funding and cash flow.