Tips to boost your credit score

The creditworthiness of your company is very important, as it determines, among other things, the possibilities of obtaining loans and also plays a role in possible partnerships. A start-up business is always a higher risk than an established business, so it is particularly important to be careful with payments if your business is a start-up. Banks and companies also check the owners' finances and you should therefore avoid payment defaults at the private level as well. The personal finances of board members can also affect the risk category of your business. Below, we'll go into more detail on how to increase your company's creditworthiness.

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What do banks and companies look at when determining creditworthiness?

There are many factors that go into assessing the creditworthiness of a company and it is not only the company's finances that are taken into account but also those of the owners and the board of directors. Usually, banks and credit rating agencies look at financial statements, so always make sure they arrive on time. They also look at the company's key ratios and whether there are any payment defaults. As a rule, neither the company nor its owner should have any payment defaults to achieve a high credit rating. The age of the company and the composition of its board are also taken into account.

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After the first annual report, a company's creditworthiness can increase, so start-ups usually have a low credit rating. If you are self-employed, your finances affect your company's creditworthiness. The higher the company's equity, the better its creditworthiness. Other determining factors are the company's profits and margins - a company with good profits over a longer period of time will have a higher credit rating. However, keep in mind that bookkeeping is very important. Also, make sure you have administrative control so that bills are paid on time.

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How to increase your creditworthiness?

As an entrepreneur, you can increase the creditworthiness of your business in a number of ways and the most important thing you can do is to keep your business in order. You need to have a good understanding of your business finances and pay salaries and invoices on time, as well as pay taxes, VAT and employment contributions in a timely manner. You should also review your cash flow and margins, and make sure you don't undercharge to cover all running costs. You should also plan for the low season in your business.

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The financing of your business is also important, with a well thought-out financing strategy you will increase the creditworthiness of your business. Financing should certainly not be used to cover up if your business is not profitable, but it should be used to increase the profitability of your business. It may also be wise to try to replace your financing with a cheaper alternative, or by gathering everything in one place. Last but not least, customer satisfaction is important for your company's credit rating. Satisfied customers will hire you again, which means a steady income, and their good word can bring new customers.

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Conclusions

As with your personal credit score, keeping track of your income and expenditure is a key issue. You should pay bills on time and make sure you have enough income to cover your ongoing expenses. As a business, it's always wise to have a buffer at the start, in case something unforeseen happens. Also, keep in mind that your personal finances and those of your board members can affect your company's credit rating, so check the creditworthiness of those you elect to your board. The better your company's credit rating, the more financing you can get to grow.