Your business credit rating or credit score is a vital component of your business’ success. It is more than just a number or a scale, your credit rating helps lenders to determine whether your business will be able to pay its bills on time and whether you are eligible for a business loan.
Your credit rating is influenced by a number of different factors including:
- Your companies’ payment history
- Your companies’ total amount of debt
- When you held credit, and for how long
- The type of finance your company has
- Any recent applications for finance
Many companies in Ireland don’t realise that their credit rating has deteriorated until a lender checks their score and they are refused credit, so it is important that businesses stay on top of their debts and payments to ensure that their rating stays healthy. Capitalflow want to help our clients to stay on top of their credit rating, so here are some hints and tips on the best ways to improve your credit worthiness.
- File your accounts on time
Filing your accounts and annual returns on time with the CRO can make a big difference to your credit rating. Filing late can have a negative impact. - Pay your bills on time
Credit rating agencies will know if you have been late making payments on credit cards or loans and if this is a common occurrence it will affect your credit rating. Try to get into the habit of paying on time, every time and ensure that overdrafts are cleared annually. - Only look for credit when you need it
Although it can be tempting to explore the various financial options available for your business, too many applications in a short time can leave a CCR (Central Credit Register) ‘footprint’ that might suggest that you have been struggling to secure funding. Keep your credit rating healthy by only looking for credit when you know you need it and limiting it to the amount you require. - Keep debts in check
If your company has directors’ loans, think about increasing your capital and changing the loans to equity, to lower your debt-to-equity ratio. - Steer clear of judgments
A judgement will harm your business credit rating. If your company is taken to court either settle or defend the claim, do not let a judgement be registered by default. - Stay on top of changes to your corporate profile
If your business information changes (for example your registered offices) notify your bank, suppliers, and customers, as well as the CRO, as soon as possible. - Demonstrate turnover via verifiable sources
Use your business bank account regularly and over a long period of time to show your business’ turnover. (Don’t use your personal account for business receipts etc) - Keep an eye on inventory, debtors, and creditors days
Don’t let key indicators get out of control, maximise the liquidity of your current assets and liabilities to increase your credit rating.
Lenders are obliged to utilise the Central Credit Register (CCR) which is a register of loans and loan applications by individuals and companies. Your CCR credit profile is important and used by all lenders to build a customers’ credit rating. More information can be found on Central Credit Register where you can request a copy and check for its accuracy.
Your credit rating is central to your business’ success, good scores will help your business to flourish, while a poor score could make it harder to get ahead.
If you are looking for secure ways to enhance your business, talk to Capitalflow today about a business loan that is right for you. Log onto capitalflow.ie or call 01-5632430 today.
Notice: This material has been prepared for general informational purposes only, and is not intended to provide, and should not be relied on as tax, legal or accounting advice.
