How can a Business Strengthen its Credit Situation?
Setting up a business can be comparatively simple work, but maintaining the business can be a complicated task. In order to keep the business in a healthy condition, the business owners need to go the extra mile which can sometimes lead them to neglect the credit ratings of the business. The credit ratings have a huge importance in the total amount which the company can borrow.
Let’s understand the Business Credit rating and how it will help your business maintain its credit rating.
What is Credit Score for the Business?
A credit score is a number that is given to a business, and this number tells us if the company or business should be given a said amount of loan. Some firms calculate the credit rating of a business after the analysis of the present financial condition, the financial obligations of the business, the size and structure of the business, the credit history with the lenders and suppliers and many other parameters.
The business rating is different than the rating for individuals as their ratings are in the range of 300 to 850, but the ratings for the companies are ranged from 0 to 100. The higher the Credit rating, the better it is for the business. The higher rating will mean that the business is in a better position to repay the entity’s loan, and thus such companies are much more suitable for loans or any other form of credit.
Ways to Improve the Credit Score of the Business
By following the steps provided below, a business will be able to strengthen the credit situation. The different ways to improve the credit rating are:
- Making the Payments on time
One of the easiest ways to maintain a high credit score is to make the payments of the loans taken on time. Not paying the bills on time or making late payments can hurt the credit situation of the business. one can even strive to pay the bills before the due date to improve the credit scores.
- Keeping the debts to a minimum
If a business takes a lot of debt, then it can mean that the business is not financially stable. This will reduce the confidence of the banks and other financial authorities. The business should try to minimise its utilisation of the credit so that it will be better for the credit rating of the company.
- Open New Credit Accounts
The business should open up a few more credit accounts and use this account to obtain credit. The business should ensure that all the rules are being followed and the credit amount is paid up on time.
- Keep the Unused accounts open.
All businesses should avoid removing the credit accounts from the credit report even if they are paid. The closing of the accounts may have a negative effect on the credit rating of the business and may even limit the credit which you have at hand.
- Correct the Errors
While presenting the records for analysis, the management should take care that there are no mistakes present as even the smallest mistake may lead to huge differences in the credit rating. It is recommended that such mistakes should be removed from the financial reports of the business.
- Check the Previous Credit Report of the Business
It is a very basic step, but this step can also help understand which aspect of the company is not working properly and will help reduce the credit requirement of the business.
With a higher credit score, the business will be able to procure more credit, which will affect the working and profitability of the business. If You want more information about the credit score of businesses and how they can help your business, then feel free to contact the experts at JAXA Chartered Accountants.
JAXA is an ISO 9001:2015 certified firm that provides many services which will help your company to be more successful and make the most of the resources available to the business. The services provided by JAXA include Auditing Service, Accounting Services, VAT and Tax related services and many more. To know more, Contact Us. We will be happy to help.
