Experian has recently advised small businesses not to overlook their credit rating when they are looking to negotiate with suppliers. Small businesses are hoping that 2012 is going to be a good summer due to the increase tourism that should bring some welcome relief after a long time of economic uncertainty.
Every year, most firms will make a plan about what their actions are going to be over the next year but many will unfortunately overlook their credit rating. It is important to consider this as it can give you a better negotiating position when dealing with contracts made with suppliers.
Small firms are likely to need to secure the best deals on essential items, such as banking, the telephone and utilities. If they are suffering from a poor credit rating that it can be hard to secure the best deals as the companies will see you as a greater risk.
With a weak credit rating a company will be sceptical of your ability to meet your financial obligations and therefore will set up strict payment terms. Research by Experian found that in 2011 most companies operating in the leisure sector paid their bills an average of 30 days late. This has meant that small and medium-sized companies are being particularly scrutinised by utility providers so that they pay their bills regularly.
The bigger problem is that some cannot secure new finance if they don’t have a good credit rating. Many companies do not realise that if they register more information officially then they are going to be seen as a lower risk to lenders and therefore are more likely to secure financing.
The credit rating by which your business will be judged is usually based on how the directors have performed in previous business endeavours. If you are starting up a company for the first time it can be a good idea to partner someone who has previously experienced success. Experia also showed that a business with two partners is much more likely to succeed than someone who is setting out on their own.