Join the Esme experts to find out what a business credit score is and how it is calculated, as well as three ways you can help maintain a good credit for your business.
Setting up and running a successful business comes with a number of obligations and requirements, and maintaining good business credit should be at the top of the list. Good credit can say a lot about your business’ ability to manage its finances and increase your chance of securing business finance.
What is a business credit score?
A business credit score is a figure calculated by a credit agency – a company that collects information about a business and makes it available to banks and other lenders.
A credit agency will look at your business’ information and allocate points to each piece of information, which is then combined to create your credit score.
This score is used by banks and lenders to help assess how well your business may be able to repay a loan based on previous financial activity.
How is a business credit score calculated and what is a good one?
Every credit agency will calculate your score using different formulas; therefore you may see your credit score changes depending on the agency used.
Credit scores are calculated using different scales. Therefore, there is no universal credit score or a number that represents the highest achievable score. For example, some credit agencies will score from 1-700, and others may score from 1-1000. The closer your score is to the maximum the better, whatever credit agency you use.
Your credit score is calculated based on your business’ financial information that is available at the time, such as:
It’s important to keep your information up to date, especially with the electoral register and companies house, so that your business’ information and credit score is accurate.
How do I check my business credit score?
You can get a free business credit check with credit agencies Experian and Equifax. Once you’ve received your credit score, check which scale is being used so you can fully understand your score.
If your business is in good financial health, chances are you’ll have a good score.
1. Pay your bills on time, or early
If you’re looking to maintain or improve your credit score, an effective way of achieving this is by paying your bills on time, or even early. It demonstrates good habits and organisation as well as reliability in paying your business’ expenses.
2. Use your business credit card for daily expenses
Without a business credit card, credit agencies find it difficult to track how your business spends money and how well you are able to pay it back. If you pay back at least the minimum payment each month, and keep expenditure relatively low compared to your credit limit, it could boost your credit core.
3. Keep on top of your personal credit score
Whether your business is new or well established, many lenders will also look at your personal credit score.
Keeping your business and personal finances separate makes it much easier to manage your business’ finances and cash flow. Although they should be separate, it is strongly recommended to maintain your business and personal credit core to be in with a higher chance of being accepted for business finance.
With various credit score formulas available, understanding your score can seem complicated at first.
Maintaining a good business credit score doesn’t need to be complicated. Following the steps above, you could be in a better position in achieving this and have the potential to build better relationships with lenders and suppliers.
Here at Esme, we offer online business loans from £10,000* to £150,000 over a 1 to 5 year repayment period. You could choose the best amount and term to fit that suits your business. If you apply for a business loan with us, it will not affect your credit score and cannot be seen by other lenders.
* From £25,500 for Sole Traders
Join the Esme team as we explain the eligibility requirements that need to be met in order to apply for loans of up to £100,000.
For many SMEs, business expansion is a sign of success and the opportunity to increase profit. However, in practice, it can be an uncertain affair, involving large amounts of money being invested without an immediate guarantee of a return.
Whether you’re a beginner entrepreneur taking your first steps into the big world of business, or an established owner contemplating expansion, it’s vital to have a thorough understanding of your finances. We share top tips on how to keep on top of your income and expenditure.