How to improve your credit rating
Having successfully navigated the various hurdles to agree to supply large national and multi-national businesses a small/medium sized business (SME) will sometime fail the last hurdle of credit checks. This is a bitter pill to swallow as the SME will no doubt have spent months or possibly longer getting agreement to trade. SME’s are often unsure how to consider credit position and often leave it.
The issue is made more difficult by the fact that each business, whether a national/multi-national business, bank or credit rating company, will usually have their own methodology of assessing the credit risk of each SME. Nevertheless with some forethought SME’s maybe able to improve their credit rating position. There is no magic bullet to suit all circumstances but some common ideas for early stage businesses include:
- preparing a balance sheet for filing at Companies House immediately after a fund-raising to show the increased capital base
- should related party loans be shown as long term liabilities or converted to share capital
- ensuring accounts are filed with Companies House on time
- think about the number of directors & frequency of changes in directors.
For businesses with a longer trading history consider filing accounts earlier than usual if they show trading has improved; for businesses that are larger still, consider asking certain credit insurance companies to come in to meet SME management to see if low ratings can be improved. Naturally, care should be taken with the last point and it will only be in exceptional circumstances that such action be considered.
Nevertheless where SME’s are concerned about their credit rating for trade they should take advice about how it can be managed.