Knowing How Your Business Credit Score Affects Your Company

Business Credit Score

Your business credit score matters the most when you want to improve your financial standing in the market. A good company credit score reflects your approach toward your business and how do you manage your finances. A credit information report tells a lot about your business. It contains information about your company, from its address and contact details to your payment and credit history.

Let’s understand the impact of a positive credit score and a negative credit score on your company.

How does a good business credit score impact your company?

Your business achieves creditworthiness

For a startup, it’s difficult but important to gain creditworthiness in the market so that it can sustain the course in times of emergency. Business people like investors and lenders review your credit information report to determine their interest in working with you. So, if you’ve got a good business credit score, you’ll be at ease when it comes to dealing with finances and managing cash flow. 

Your vendors and suppliers will have an impression that your business can avail of a credit facility and repay it without risks. For MSMEs, it’s necessary to be on good terms with their suppliers and vendors. And when your business has got credibility, you’ll be seen in a good light. So, it’s important to check your company’s CIR regularly.

You can avail credit easily

One of the important benefits of having a good business credit score is that it boosts your borrowing power. Your financial capacity to take credit increases. It means you can easily put forward your favorable credit terms and rates, and lenders would happily oblige to your request. It is due to your impressive business credit score that lenders and investors anticipate less risk in financing your business. They get a certain amount of surety that you’ll be able to pay your dues on time.

You save your business from fraud

In business, you’ve to take risks. It could be entering a niche market, buying an existing business, or simply trusting your vendors for a smooth payment process. The latter may be tricky. Once you’ve sold the material and it’s time for payment, your supplier or vendor may come up with several reasons for delaying or missing payments. How do you ensure a decent cash flow when you foresee a risk of your money being stuck with your debtors? 

The solution lies in approaching credit reporting bureaus like CreditQ that help MSMEs and businessmen settle payments with their business credit defaulters. However, if you’ve got a good company credit score, it means that you’re managing your finances and payments well. 

How does a poor business credit score impact your company?

You lose on important clients and prospects

A commercial credit report in India reveals a lot about a company’s financial performance and market stability. If your business is going through a rough patch and has a poor credit information report, your company credit score is likely to suffer. As stated above, your lenders and investors and access your business CIR and decide if they wish to join hands with you or not. So, in case you’ve got a poor credit score,  your business may lose important clients and find itself in a debt situation. 

It’s hard to find a creditor

With a good business credit score comes the liberty to negotiate credit terms the way you want. However, if you’ve got a poor credit score, you’ll find it hard to get credit from the market. Creditors may foresee a risk of irregular repayments. They may be reluctant to share their business interest with you as they may find your business with less potential to invest and grow. Upon reviewing your company CIR, lenders may decide to give you credit but with their choice of interest rates and terms.

Your business loses credibility

With all that said above, you would know by now that it’s not good if you have a poor credit score. It affects your business negatively. You may receive a hard-hitting review from your lender or supplier concerning payments and debt clearance. Your business is likely to lose credibility in the market, and you’ll have to find several measures to survive the storm. 

So, it’s important to maintain a good business credit score and follow standard business practices such as reporting your business credit defaulters on platforms like CreditQ to save your business from fraud.