Tips to increase your credit rating

The creditworthiness of your company is very important, as it determines, among other things, the possibilities of obtaining loans and also plays a role in any cooperation. A start-up company always has a higher risk than an established company, so it is especially important to be careful with payments if your business is a start-up. Banks and companies also check the finances of the owners and you should therefore avoid payment notices even at the private level. The personal finances of board members can also affect the risk class your company falls into. Below we will go over more about how to increase your company's credit rating.

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What do banks and companies look at when determining creditworthiness?

There are many factors that weigh in when assessing the creditworthiness of a company and it is not only the finances of the company that are taken into account, but also that of the owners and the board of directors. Typically, banks and creditworthiness investigators look at financial statements and therefore always make sure they come in on time. They also check on the company's KPIs and whether there are any payment notes. As a rule, neither the company nor its owners should have any payment notes in order to achieve a high credit rating. The age of the company and the appearance of the board are also taken into account.

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After the first annual report, a company's credit rating may increase, therefore, startups usually have a low credit rating. If you have your own business, your finances affect the creditworthiness of the company. The higher the equity the company has, the better it is for the creditworthiness. Other aspects that determine are the company's profit and margins — a company with good profits over a long period of time gets a higher credit rating. However, keep in mind that accounting is very important. Also, be sure to have administrative control so that bills are paid on time.

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How do you increase your credit rating?

As an entrepreneur, you can increase the creditworthiness of your business in a number of ways, and the most important thing you can do is keep your business in order. You must have good insight into the company's finances and pay wages and invoices on time, as well as pay taxes, VAT and labor fees in good time. You should also review liquidity and your margins as well as make sure that you are not charging too little to be able to take care of all running costs. Also plan for the off-season within your business.

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Financing your business is also important, with a well-thought-out financing strategy, you increase the creditworthiness of the company. Funding should absolutely not be used to cover up if your company is not profitable, but it should be used to increase the profitability of the company. It may also be wise to try swapping out your financing for a cheaper alternative, or by pooling it all in one place. Last but not least, customer satisfaction is important for a company's credit rating. Satisfied customers will hire you again, which means a steady income, in addition, their good words can bring new customers.

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conclusions

Just like when it comes to your personal credit rating, it's a lot about keeping income and expenses in order. You should pay bills on time and make sure to have income that covers the current expenses. As a company, it is always wise to have a buffer at the beginning, in cases where something unforeseen should happen. Also, keep in mind that your personal finances and those of your board members can affect the company's creditworthiness, so check those you elect to your board of directors. The better the credit rating your business has, the more funding you can get to grow.