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The best ways to improve your business credit rating

London, UK (17/08/2009)

LONDON (Business Link) Unfortunately, nearly two thirds of UK small firms are carrying a credit rating which may negatively affect their ability to obtain credit finance and favourable credit terms from suppliers, according to research by a leading credit insurance supplier¹.

Up to 60% of small businesses in a sample of three million were described as 'high risk' or 'above normal risk', in terms of defaulting on trade payments or getting into financial difficulties.
 
Credit checking

The credit management industry is warning small businesses that they need to keep full and audited accounts in order to access trade credit or trade credit insurance. They also advise small businesses to demand audited accounts from potential suppliers and customers.

Improving your business credit rating

There are a number of ways in which you can help improve your business' credit rating. Here are some suggestions from the Better Payment Practice Campaign:

Always pay on time

The payment experiences of your suppliers is a key part of your credit profile so to drive a positive credit rating you should always pay to agreed terms. If you don't you can detrimentally affect your ability to get credit, not only from suppliers, but also from banks and other finance providers.

Ensure that all relevant trade experiences are represented

A lack of information on your profile can be just as harmful as a poor credit history. There is no requirement for companies to send information about their customers to credit bureaux, so the key to establishing a business credit profile and high rating is to forge relationships with companies that will establish credit for your business and who may report positive information when asked, as part of a trade reference request.

Get listed and keep your registrations up to date

Credit agencies check various sources such as telephone enquiries services and Companies House to confirm that your business is genuine, so ensure your business is listed in telephone directories and, if you are a limited company, that company registration details are accurate and up to date, and that accounts are filed on time.

Keep your personal finances in order

Credit agencies can offer the option of reviewing the personal credit profile of key individuals, particularly within smaller businesses which do not have a detailed business credit rating, so it is important to keep on top of your own finances.
Experian, the leading credit reporting agency adds this advice for business credit card holders:
 
Decrease the balance on your business credit cards.

If you have good credit, requesting a credit line increase can improve your credit even more because such an increase lowers the percentage of your available credit in use.

If you have a generally positive credit history with a business credit card, don't close the account.

Keep track of your credit reports – asking for your business' credit report will not affect your rating.

Experian and Equifax are the leading credit reporting agencies in the UK. Learn what information credit reference agencies hold from the Experian website.

Small businesses hit hardest

According to the British Retail Consortium, the reduced availability of credit insurance has made trading more difficult for 40 per cent of small firms.

Recognising the difficulty, the Government announced a scheme in the April 2009 budget allowing firms to buy top-up trade credit insurance from selected insurers, which is guaranteed by the Government. This will either match the reduced cover still offered by the insurer or restore the cover to its original level, whichever is the smaller.

There are limitations, however. Firms can only buy six months' extra cover and the offer is only open to firms that have had their cover reduced since 1 October 2008.

The top-up scheme is available until 31 December 2009.
 
¹ Graydon UK, published June 2009.
To find out more information, visit the Business Link website at: http://www.businesslink.gov.uk/bdotg/action/detail?r.lc=en&type=ONEOFFPAGE&site=210&itemId=5001344555&r.s=sl or call them on 0845 600 9 006.
 


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