Credit rating or credit score is more important than people realize. For instance, your personal credit score determines whether you’re a high risk to lenders and will they charge you with a high-interest rate, when giving you the loan. Furthermore, if your personal credit score is low, you may not even be eligible for a loan in the first place.
On the other hand, company credit rating is a credit score for businesses and the same rules that apply for a personal score also apply for a company credit rating. Business owners need to maintain a strong company credit rating in order to avoid any inconveniences when seeking additional funds from a lender, asking for a business credit as well as when signing contracts or competing on tenders. Here’s why you should keep your credit rating as high as possible.
Financing your business
Business credit is essential for any business survival. It allows you to expand your business, hire staff or make the necessary purchases. However, with a bad company credit score, your business may suffer high-interest rates or become excluded from additional funding, which you may need to save your business in difficult situations. In addition, your credit score will determine how suppliers, business partners, and even customers perceive your business.
For instance, if your company credit rating is bad, some business owners you wish to start a partnership with, may decline your offer. Also, inventory suppliers may reconsider doing business with your company. Furthermore, you may not receive a loan from a lender that you require to expand your business. That’s why it’s important to maintain a high credit score.
Supplying your business
Company credit score affects your supply chain and your suppliers. A bad credit score will force your suppliers to stop providing you with inventory. It may also increase the cost of supplies as well. Without a supply chain, your business won’t survive, and paying extra for inventory will prevent you from making a profit. You should always do your best to improve your company credit rating and avoid such inconveniences. Here are a few things you can do to improve your company credit score.
- Make sure you pay all your invoices on time, otherwise your credit score will decline.
- Make sure you file your annual returns, as well as your financial accounts on time. If you are late, lenders may believe you have financial issues.
- Try to settle any Country Court Judgments within a month or try to avoid them at all.
- If you are a startup owner, who finances their own business, make sure you have a good personal credit score. Because, your own credit score also affects your company score, especially when you’re the main benefactor.
- Ensure that your business is registered with one of the credit reference agencies. Providing information about your business helps your company score.
Check your company credit report
By checking your company credit report frequently, you are able to monitor your credit score and make corrections early on if you start doing something wrong. Your company credit report contains information about employment, insurances, business licenses, credits, underwritings and so on. All that information may contain a simple mistake that can hurt your credit score and by checking it often, you will be able to correct any mistake.
If you have trouble with bad credit history, companies such as Clean Credit can provide assistance with getting your credit history in order. Furthermore, you can monitor your loan applications and interest rates and make sure that the information is accurate. Always check your company credit report, that way you can avoid any unpleasant surprises and correct any mistakes, which may reduce your credit score.
Every entrepreneur should maintain a high company credit rating. A credit score determines whether your business will get the finances it needs to survive or will you have to close shop.
He is Mr.Dan Miller, He is a Payments officer with nearly ten years of experience in banking and international payments in the Australian banking sector. He has a masters degree in finance and banking. He is married and also a father of a beautiful little girl.