It is well known in today’s economy that maintaining a good personal credit rating is a good idea. It matters when you want to rent an apartment, set up a telephone subscription, rent a car, take out a loan or have a job where you have to deal with cash. It also affects you as a business owner and can have an impact on your company’s financial opportunities.
A good credit rating in business relationships works in almost the same way. So let’s look at how you can maximize your efforts to ensure your business grows.
How does your credit rating affect your business?
Let’s face it: maintaining a good credit rating is an ongoing task and nobody wants to leave. In addition to helping to build a good reputation with your business partners, your credit rating can increase your chances of accessing capital so you can control business risks and your cash flow.
At Ferratum, we work with thousands of SMEs every month. We can guarantee that the best way you can improve your ability to obtain working capital just when you need it is to improve your credit rating through assessment, planning and following a strategy.
We recommend that you take a closer look at the steps below to improve and manage your credit rating.
1. Responsible management of your business finances
You probably already know – or have an idea of - how your credit rating is assessed, and you may have already established some processes for how to maintain and improve your credit rating.
Managing your finances responsibly is, according to many professional advisers, the best way to consolidate a positive credit rating.
But what does that mean? In short, you should strive to always pay your suppliers on time.
This is of great importance to your creditworthiness, because payment history is crucial to obtaining a positive credit rating.
2. Overview of your finances
It is good business practice for an entrepreneur to have a minimum of insight into tax matters and accounting. At the same time, it is of course smartest to leave all accounting transactions to your accountant. Understanding and maintaining a healthy liquidity and solvency will help you be prepared for unforeseen expenses and situations.
3. It is a bad idea to disregard your personal credit rating
Your personal credit rating over time is still an important factor in assessing your company’s credit rating – especially in the beginning.
You can improve your company’s financial position by managing your corporate and personal finances in a healthy way. Therefore, maintaining a good personal credit rating is important.
You can begin by developing a routine where you check your personal and business creditworthiness and ensure that the information provided is accurate.
4. Create a business account
It is also important to keep your private and business accounts separate. This means separate bank accounts and separate credit cards.
5. Strive to maintain a consistent corporate identity
If you want your business to be perceived as a professional business, you should maintain the same identity in all your communications. For example, check that you use the same company name, address and phone number in all correspondence, invoices and marketing materials as well as on social media.
It’s not a simple task when you think about how many online tools you use on a daily basis, but if you are consistent, it helps you separate your business identity from your personal identity, making it easier for corporate credit institutions to get accurate information about your business.