Business credit rating: top 10 tips

4th January 2022

For some businesses having a strong credit rating is fundamental to their future success. It can affect availability of supplier credit, the ability to borrow and eligibility to be on customer/prospect tender lists as an approved supplier. For many other businesses, however, this credit rating is totally irrelevant.

Experian is one of the major rating agencies for UK SME companies. It gives a credit rating based on public record information on companies, banded as follows:

  • Very Low Risk
  • Low Risk
  • Below Average Risk
  • Above Average Risk
  • High Risk
  • Maximum Risk
  • Serious Adverse Information/Dissolved

As you would expect, the best way to be given a strong rating is, in the run up to your year end, to manage your balance sheet to naturally show healthy net asset and net current asset positions (through strong trading, a conservative dividend distribution policy and by following helpful accounting policies and presentations).

If trading is not strong enough to automatically achieve this, however,  other helpful actions that you may wish to consider include:

  1. If not already formalised, consider reclassifying some drawings from dividends to repayment of your director’s loan (even if making it overdrawn).
  2. Make sure your annual statutory accounts and annual confirmation statement are submitted to Companies House by the due dates.
  3. Manage the timing of filing accounts on the public record at Companies House, so as to delay/minimise the period of bad news and advance/maximise the period of good news.
  4. Consider changing your accounting reference date, if it presents a stronger balance sheet.
  5. Apply, where eligible, to have any county court judgements removed from the public record.
  6. Reschedule and disclose directors loan accounts as a long term liability rather than a short term liability.
  7. Convert directors loan account into equity (inc redeemable preference shares).
  8. Waive directors loan account credit balances.
  9. Issue further equity (inc considering called up but not paid shares).
  10. Revaluing upwards (if appropriate) your fixed assets.

As some of the above actions need actioning before the balance sheet date, best advice is to review this, with up to date management accounts, about 1 month before your year end.

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