Guide on How to Establish Credit for Your Small Business [2019]
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Guide on How to Establish Credit for Your Small Business [2019]

Creditworthiness is a big part of our lives. It helps us buy property, a car, get insurance, and even get a new job. It’s exactly the same in business. Just like you have an individual credit score, so does your small business.

‘Creditworthy’ basically means ‘trustworthy’. Finance providers, lenders, and anyone else you do business with, will want to know how good you are at paying off debt and making financial commitments. Your small business credit rating will tell them this.

If you’re taking out a business loan, or even just setting up a business current account, the provider will judge how creditworthy you are by searching for your business with a credit reference agency (e.g. Dun & Bradstreet, Corporate Experian, and Equifax Small Business). Your report will usually show a score between 1-100 (100 being the best you can get).

Your business credit report will mainly consider:

  • The basic details of your business (address, how old it is, who’s in charge)
  • Your current debts.
  • How much you’ve already paid off, and how much you have left to repay.
  • Your bank accounts and their statuses (active, not using anymore, in credit, overdrawn etc).
  • Official records and filings (HMRC, Companies House, etc).

Experian explained

Experian is one of the most well-known credit checking websites. You can sign up to My Business Profile for an Experian business credit report.

You’ll see your business’ overall score, and a breakdown of your financial information and history. This will also show you how lenders, suppliers and customers see your business. 

Why is your small business credit rating important?

Your credit score can affect whether you’re approved or turned down for finance products, credit cards, business loans, bank accounts, and more. 

It also determines how much you’ll have to repay. If your credit score is very high and you have a good record of paying off finance on time and in full, you’re more likely to get a lower interest rate and repay less overall. You might get longer terms too, so you can spread payments out or clear them faster.

If your credit score isn’t quite as good, lenders could see your business as riskier to lend to, so they’re likely to increase the interest rate.

How to establish your business credit score

For businesses in their first couple of years, establishing good credit can feel like a bit of a mystery. This is how to create a strong foundation for your Experian business credit report.

  • Keep your essential info up to date on official databases, Companies House, and with your suppliers.
  • Stick to tax filing deadlines. These are essential business responsibilities, so it’s important to stay up to date.
  • Don’t keep applying if you get a ‘no’. The more rejections you receive, the lower your score will be.
  • Pay everything on time. Paying invoices and suppliers in full shows you’re good at managing bills.
  • Keep an eye on your personal score. Some lenders will look at your score too.

How to keep improving your score

Once you know your credit score, you can keep improving it and adding more data to your report. Paying debt off and keeping information up to date are essential good habits.

It’s also a good idea to sign up for regular Experian alerts and keep an eye on your score. You can check how your report changes, spot any emerging problems, and identify things to improve on.

The more you look after your score, the better your chances of getting approved for competitive business loans, credit cards, and other business finance products. Your business will have more options when you’re making financial decisions, and you can put big growth plans into action.

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