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This year’s Talk Money Week will focus on the theme of ‘credit’, and we are looking into credit from a business perspective.
Everyone is feeling the pinch with the current rise in cost of living, and this includes the cost of running a business.
Why should a business need credit?
Previously, we looked at the importance of business cash flow, although sometimes, it is necessary for an organisation to use credit facilities.
Businesses borrow money for several reasons, one being additional cash flow. This enables a business to purchase materials from suppliers to produce more products, generating more sales and increasing profits in the long run.
Using credit will get a new business off the ground quicker or will help to expand an existing business faster. Credit allows the business immediate access to funds which can be used to buy things like property, stock,
Obtaining credit using a credit score
A good credit rating can help you borrow larger amounts, or pay less interest, on the amount borrowed. Lenders can use your business credit score as an indication as to whether you’ll be able to meet the payment terms. Scores go from 0 to 100 and the nearer your rating to 100, the better chances the
Both Start-ups and established businesses will have difficulty getting bank loans or even a business account at a bank if they have a bad credit rating. This can greatly limit the flexibility of a business.
Knowing your business credit score and how to improve and maintain it, is essential for the continued success of the organisation. Business credit scores provide a picture of the financial health of a business. They are calculated by measuring payment and default history, levels of debt, legal problems, customer base payments and defaults, and sometimes the type of industry the company operates in.
How can we help?
If you are struggling to regulate your business finances to give you a healthy credit rating, get in touch with the team to see how we can help.
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Disclaimer: Information provided by Kidwells Accountancy on our website is for informational purposes only. It is provided in good faith but we make no guarantee of any kind regarding the accuracy, reliability, or completeness of any information on our site. We always recommend businesses seek independent legal and financial advice before working with us or acting on any information on our website.