APRIL 2024 AFTERMARKET 13 www.aftermarketonline.net Making improvements So, whenever an application for credit is made, information on a credit report will be used along with other sources of information to determine whether a lender will agree to the request and on what terms. And this is why firms, according to Andrew, should make every effort to maintain a good report as it influences their ability to make purchases. He points out that “business credit ratings are not as ubiquitous as personal credit ratings, however they are more prevalent when dealing with larger purchases or lending decisions, such as for a loan or a business vehicle.” It follows that a well-managed credit report will be seen by lenders as a positive. But as James details, “businesses with little to no financial history – known as ‘thin file’ businesses – may struggle to be accepted or get the best rates. In these circumstances, a business owner’s or director’s personal credit scores can be considered to help with the decision.” Information in the world of credit is clearly everything; if it’s suspected that information held is inaccurate or plainly wrong, steps should be taken to correct it. James says that the only option is to dispute the business credit report by contacting the relevant credit reference agencies. Not only can they correct data that can be shown to be inaccurate, but also have services to review whole reports. Experian is a good example with its Credit Review Service. Credit information for suppliers Credit information is almost as ubiquitous in the world of commerce as it is in our private lives. Businesses wanting to buy a vehicle, buy goods on terms, or take out a new bank loan are very likely to be checked for their ability to repay. Having a clean bill of health in this department is essential to both getting approval and an approval on good terms. But the wonder of information is that it invariably has more than one purpose. Just as a credit report allows a lender a window into the world of a (potential) borrower, so the process can be reversed by any business looking to check on its suppliers (and its clients). James makes the case here as being one of commercial survival as “any business can protect their revenue flow by running credit score reports on their customers to ensure they can pay for their services.” That said, many firms will generally require payment at the time of the work whether in ‘cash’, by card or credit instalment plan via a third party. However, if a firm partners with another a check could be of value. Credit information can aid the fight against fraud in that credit checking a business can confirm that contacts are who they say they are – and that their business is performing the way they say it is. For James “this kind of due diligence can save a lot of hassle and lost revenue down the line.” Credit reference agencies offer a variety of services to support a business dealing with a large volume of clients or suppliers. Here Fielder details that products to note “include services such as ad-hoc credit reports or the ability to use the data for account opening and account management.” Of course, each agency will do something similar and more. Equifax, for example, offers products to age verify, bank account verify, document verify, and more. Firms should hunt around. The cost of protection The costs associated with credit information aren’t as horrific as might be expected. James reckons that Experian’s Business Express – which costs from £25 per month – “has one of the most predictive scoring models in the industry and lets a business easily determine the creditworthiness of their business partners.” He asserts that it can help a business predict business credit risks and failures within the next 12 months. Alternatively, where a business wants to check and improve its own business credit score, Experian has My Business Profile at a cost of £24.99 per month. “This,” says James, “enables a business owner or director to gain full visibility of their business credit profile, enabling them to understand what’s affecting their company credit score.” Granted it’s a cost, but for Andrew, credit ratings tell subscribers which companies are growing, and which are shrinking and that’s got to be a benefit. In summary Like it or not, credit information exists and is here to stay. Whether it’s to borrow or to seek terms with a supplier, having a whiter than white report is going to put a firm head and shoulders above its rivals. And with profit being a function of revenue less cost, anything that shaves off expense and risk has to be worth examining. How to improve a credit rating 1. View your business credit report to understand the positive and negative factors in your history and plan the best path for progress 2.Make a note of suppliers’ payment terms and plan payments so they are on time. Poor payment performance can indicate a business struggling to service its debts 3.File annual returns and financial accounts on time. Making more information on your business available helps suppliers, utility providers and lenders to understand it and make appropriate decisions 4.Avoid County Court Judgments. Should one occur, settle it promptly 5.Keep an eye on your personal finances. Directors’ personal credit scores can be considered for new businesses when little information is available 6.Appoint a director with a strong history of running companies and a good credit score to help boost your company’s standing 7. Check and monitor the credit status of the companies you work with, so you can anticipate any supply chain problems before it affects the business.
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