Business creditworthiness: how to improve your credit score

In business, creditworthiness, as assessed through our credit reports, plays a central role, with the question of whether a company can pay its bills being of great importance. This is especially true for businesses that depend on financial stability when providing loans, establishing business relationships, or delivering products on credit. How is a credit rating determined, and how can you optimize or strengthen your company’s credit score? This article provides insight into this crucial aspect of your business success.

The importance of creditworthiness

Financial institutions, leasing companies, and businesses attach importance to the creditworthiness of (potential) customers, suppliers, and business partners. They assess creditworthiness through our credit reports. The fundamental question is whether a company can meet its financial obligations. This assessment is crucial to minimize the risk of default. A low creditworthiness can result in upfront payment requirements or other risk-mitigating measures from businesses, something your company surely wants to avoid.

The components of a credit assessment

Our online store provides credit reports via credit information bureaus that conduct credit assessments on businesses, mapping out their financial health. The credit assessment comprises three essential components:

1. Credit limit: This indicates the amount up to which it is responsible to do business on credit with a specific company. Calculations for this are based on key figures such as working capital and equity.
2. Creditworthiness rating: An assessment of the risk profile on a scale of 1 to 4. Factors such as financial statements, payment behavior, and demographic characteristics contribute to this creditworthiness rating.
3. Payment score: A score indicating how timely a company meets its payment obligations, based on payment experiences from suppliers.

Improving your creditworthiness

A positive credit score offers numerous benefits, including more favorable terms and increased business opportunities. Here are four practical tips to optimize your creditworthiness:

1. Provide financial statements: If there is no obligation to deposit financial statements, proactively provide them to creditworthiness bureaus to make the credit check more complete.
2. Engage your creditors: Your company’s payment behavior influences the credit score. Engage your creditors to gain insight into your timely payments.
3. Leverage parent company creditworthiness: If your parent company is creditworthy, it can stand as a guarantor for the operating company, positively impacting the credit score.
4. Maintain financial health: Ensure that your company remains financially healthy with sufficient working capital and equity, resulting in a higher credit limit in assessments.

By following these practical steps, you can strengthen your company’s creditworthiness, gaining access to more favorable financing opportunities and laying a solid foundation for successful business dealings.