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The business value of a credit report

Article provided by Experian

A business credit report is less an unpleasant necessity and more an artist’s paintbrush. It paints the picture of your business, showcasing its financial capabilities and opening doors to credit facilities. A good credit rating provides an indication that your business is sound, has a clear vision, and is committed to being an active, responsible participant in the marketplace. Having a good credit reputation instils confidence in the business and its planning. It also gives small businesses the financial freedom to transition to the next phase of growth. 

The reality is that a credit report forms a key part of the decision-making process for lenders and service providers. Whether a small business is applying for finance with a lender, credit with another business, competing for a supplier contract or simply trying to get a good deal on their business mobile contract, they need to understand that their business credit profile will play a role. That is why it is vital that you understand what your credit profile is saying about your business and how these suppliers, clients and lenders view your business.

Credit reputation begins with a credit report which provides an overall picture of three key elements – your credit worthiness, how established your business is, and your propensity to pay.

Factor 01: Are you credit worthy?

Your business credit report will include a credit rating which is a combination of a risk score and risk summary, along with public record information to determine if any court judgments and notices exist for the business. The report also includes company payment behaviour information featuring a summary on the business payments for the last 24 months, including outstanding and overdue account information. All these factors can be measured as positive or negative and it is important that business owners are aware of how this is influenced.

Late payments and judgements indicate that your business is not credit worthy whilst prompt payment to suppliers and an up-to-date business credit report shows willingness, readiness, and the ability to service debt; it shows that the business is proactive at managing all aspects of its operations, including its credit reputation and thus is credit worthy.  

Factor 02: How established is your company?

A business credit report also considers the age of the business and how much experience the directors have had running the company. In South Africa, this information is obtained from CIPC, and it can influence the overall perception of the entity. A business that’s had several years under its belt will likely gain higher credit traction than one that only opened its doors a few months ago. Another factor that’s considered here is how many directors a company has; an entity with a few directors or operating as a sole proprietor will utilize the personal credit information of the owners as part of the business score.

If a company has several directors, then there is more accountability, and this adds weight to the overall business credit rating and report. Experian’s business credit reports also consider the individual directors to determine if they have connections to other businesses and how they conduct them.

Factor 03: Propensity to pay

This is an important indicator of the financial health of a company and how well it manages its accounts. If a company pays its accounts and suppliers on time, and there are no risk factors associated with late payments or issues around debt, then this will be reflected in the business credit report. If you are paying your bills on time, then this is an indication that your company is a good credit risk and will play a significant role in your business being considered for new credit facilities.

The Experian business credit report will consolidate the information that has been sourced from various parties such as CIPC, courts, deeds, and payment performance information. Experian also regularly researches credit active companies to gain a more in-depth view. Depending on the data that is available, the company will be scored through the relevant scorecard. 

The final factor

Perhaps the biggest value-add for a business when it comes to regularly reviewing your business credit report is the fact that you will never get an unpleasant surprise. You will immediately gain visibility into any payment issues or reports made by other companies, and you will know what steps you need to take to improve your business’s credit profile and credit worthiness. This is immensely valuable to companies wanting to retain their reputation and grow in a very competitive market and economy. Understanding your business credit report serves to ensure a proactive management of your business wellness.  

How to request your business credit report

All National Small Business members are encouraged to download the Experian Business Credit Profile Questionnaire from the NSBC website.

Once completed, please email it to . Once received by Experian, they will send your business credit profile to you within five working days via a Managed File Transfer (MFT) site to ensure the security of your information. The instructions of how to access the MFT site will be sent via email when your business credit report is ready.

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