Five questions about your client’s business credit score

Why a good credit score is critical in creating a financially stable business

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Capitalise asked 500 small businesses whether they regularly keep tabs on their credit score. Only 29% strongly agreed that they do and just 24% say they know how to improve it.

These are sobering numbers when you consider just how critical good credit is in creating a financially stable business. The good news is that your client has you to help them understand their score, the value of regularly keeping track and how to improve it.

Read on for the five credit questions Capitalise recommends asking to supercharge your client conversations.

1. Does your client know their current credit score?

This is your starting point for any credit conversation. Does your client know what their business credit score is today? And, taking a step back from that, do they fully understand what that means?

Here’s a super simple way to explain business credit scores to your client:

Your score shows a bank or lender how much of a risk it would be to lend your business money. The higher your score, the more likely it is that your business can pay back any debt, for example the repayments on a loan. When a bank or lender considers your business creditworthy on the basis of your credit score, it means that they would feel comfortable offering you funding.

Your client’s credit score might feel like a dark cloud hanging overhead – especially if they don’t actually know what it is. Helping them find out will instantly remove the mystery. If their credit score is good, perfect. If not, that’s okay too because knowing is the first step to making improvements.

2. Is your client tracking their credit score over time?

Credit scores are fluid – they’re affected by a whole range of factors both positively and negatively. Credit improvement is an important part of any good financial management strategy. And your client will be in a much better position to improve their credit rating, if they’re regularly keeping tabs on their score.

Capitalise suggests checking in on your client’s credit score regularly so you can:

  • agree a goal credit score with them and track progress towards getting there
  • immediately see the impact any credit improvement efforts are (or aren’t) having
  • identify any peaks or dips and work with your client to take appropriate action.

3. What is your client’s credit utilisation rate?

Capitalise research shows that 58% of business leaders need help understanding business finance. So, the concept of credit utilisation rates is unlikely to be on many of your clients’ radar. In case you need a refresher yourself (or just a simple way to explain it to your client), Capitalise shares this example:

Let’s imagine your client has £10,000 in credit available across two credit cards. If their current balance is £5,000 on one of those cards, their credit utilisation rate is 50%. In other words, they’re using half of the credit available to them.

A high credit utilisation rate will likely have a negative impact on your client’s credit score. And having a lower score will mean less access to funding and less of a firm footing when it comes to winning new clients or negotiating with suppliers.

Keeping track of your client’s credit utilisation will enable you to make sure it’s at the recommended rate of 30% or lower. And identifying when their rate is too high will give you the opportunity to proactively offer solutions to balance out their credit.

4. Does your client know how to improve their credit score?

Once you’ve worked with your client to check their credit score and explained the value of regularly keeping track, they’ll likely have two questions for you:

How can I improve my business credit score? How long will that take?

The exact steps your client needs to take will be specific to their business and the factors impacting their score. The good news is that some of the lowest effort but highest impact ways to improve your client’s credit score are things that you can easily help them with:

  • take a look at their payment history and stress the importance of paying bills and suppliers on time
  • if they have several funding facilities with different lenders, help your client consolidate them into one manageable loan from a single lender
  • check whether the business is filed under the correct Companies House SIC code
  • find out whether there are outstanding County Court Judgments (CCJs) against the business that can be resolved
  • this one goes without saying but you’d miss it if wasn’t included: file your client’s full accounts with Companies House, on time and in the same month every year.

As to how long this will take, you’ll know that there’s no one-size-fits-all response. How quickly they can improve their business credit score depends on the factors that are having a negative impact on it. And how much improvement is needed in the first place.

Capitalise recommends managing your client’s expectations here. Their business credit score has been built up over time based on their long-term track record. This means that any positive changes they make will have a gradual, rather than immediate, effect.

The important thing to emphasise when talking to your clients about credit improvement is that a good credit score is worth the wait. Making small changes today will have a big impact over time that sets their business up for a successful future.

5. Do you have an easy way to find and share credit information with your client?

Capitalise is a smart online platform that gives you a complete real-time view of your client’s credit profile, credit utilisation, payment history and more. You can download and share your client’s capital report with them directly to cut down on meeting prep and make conversations about credit easy. Head to its website to find out more.