If you’ve ever applied for personal finance, you’re probably aware that you have an individual credit score. It’s checked every time you put in an application for anything from a new credit card to a mobile phone account. Your score plays a big part in determining how much credit you can get, or even if you’ll get any at all.
It’s the same for small businesses, but it appears that many SMEs are unaware of this fact. MYOB SME Snapshot surveyed 380 small business owners and discovered that 93% of them had never checked their credit score. If you’re in the dark about your business’s credit score, here’s some important information.
What Is It?
A credit score is a rating applied to your business that gives a general idea to lenders about the financial health of your company, and your likelihood of repaying any debt that you take on. The score ranges from -200 through to 1200. Different rating agencies in Australia have slightly different assessment scales, but generally, a score above 725 is considered very good or excellent.
How is my business credit score calculated?
Your business credit rating is worked out using a combination of the following information:
- Company details, like your business name, address and the names of your directors and shareholders.
- Trading time. Newer businesses can be seen as higher-risk because they haven’t built up a payment history yet.
- Credit information such as defaults and judgements for both the business and the directors.
- Credit enquiries for previous loans/finance.
- Personal Property Securities Register (PPSR) details.
- Public information such as lawsuits and unpaid taxes.
How do I find out my business’s credit score?
It’s easy to obtain your business credit score online via Equifax (at the cost of $99.95), or a number of other websites who offer the information for free.
What if my business’s credit score is too low?
If you’re concerned that your business credit score is low enough to harm your borrowing opportunities, check your report carefully to identify issues which might be driving your score down. If there are any errors, contact the company involved to ask them to remove the entry. If you’ve had a default registered against you, contact that company to see if there’s any way to rectify it.
To keep your score healthy, ensure you pay all your business expenses and loans on time. If you’re struggling with anything, contact the supplier to arrange a repayment plan. Avoid making a lot of applications for credit in a short period of time, and ensure your personal credit report is also clean. A good credit score will help you obtain the financing you need to make your business thrive.