Guide to Credit-Based Business Energy  

The cost of energy is directly related to a company’s credit score, which business owners should keep in mind. Having a bad credit score can have a significant impact on a company’s ability to find suppliers and the options and rates it has available to it. 

You’ll need a good credit score to get the best energy deal for your business.

All About Business Credit

You’ve probably heard of credit scores if you’re an individual. However, a business credit score is different from a personal credit score in that it is based on various factors. 

Numerous factors go into calculating this score, but the most important is the probability that your company will go out of business in the next year.

This is a complex subject for many people, including entrepreneurs themselves, so let’s take a step back and look at why business credit scores matter and what can be done to keep them up to date.

Why is Business credit so important?

• Suppliers check your business credit before offering terms, so good credit makes it easier to negotiate.
• Banks establish credit lines based on business credit scores and FICO scores.
• You need a solid personal credit history to get a small business loan without a business credit score.

Why dealing with it is a challenge. 

• It takes a year or two to establish or improve personal or business credit.
• You can improve your credit scores with effort, but you can’t change them directly because rating agencies determine them.
• Internal record keeping and credit score monitoring can be time-consuming.

What affects a Business credit score?

1. Company Size

Most people think that the number of people who work for you shows how big your business is. The bigger your business is, the more options you have, as long as you don’t have a lot of debt.

2. Past Payments for Bills

Total credit score includes one-time bill payments. If someone hasn’t paid a bill on time, their credit score will be lower. If possible, set up a Direct Debit to avoid late payments.

3. Finance Applications 

This means examining how often your business has requested money. The more applications you get approved for, the more likely your business credit score will rise, and the more you get denied, the lower it will be.

4. Joining Groups

If your business is in a group, the other companies will affect your credit score. Before joining, it may be wise to examine another company’s financial records.

5. The Business Director’s Personal Credit Record

The individual’s credit history is taken into account as well. Because of this, the company’s credit might suffer if the individual in question has a poor credit history. The presence of multiple directors ensures checks.

So how is Business Credit Score Defined?

Now that you understand how vital business credit scores are, it’s time to talk about what they are: A business credit score is a number that shows how likely it is that your business will get money.

This is like a personal credit score or FICO score, but it is not the same. Most people know what a credit score is and what it means. 

Every company is given a score between 1 and 100. As you might expect, a higher score is much better than a lower one. Therefore, companies that have better finances will naturally get a higher rating.

There are a few crucial ways these and business credit scores are different. First, personal credit scores range from 300 to 850, and most lenders won’t give you a loan unless your score is at least 600.

Why do business energy suppliers check your credit?

Electricity and gas suppliers like Utility Bidder have many clients with businesses checking credit scores to ensure payment. They can tell if you’ll repay the loan by looking at your credit score. They won’t give you their best rates if they think you won’t.

Energy is expensive to make and move and used in large quantities. Therefore, a business could suffer if monthly (or quarterly) bills aren’t paid.

Not all jobs are equally risky. Example: restaurant business. Their frequent management changes create uncertainty. Suppliers use this information to decide what price to offer or not offer.

What happens if you have a bad credit score?

It’s bad for businesses, especially high-risk businesses, to have a credit score that’s less than perfect. However, if you have a low rating, your options for energy providers and rates are limited.

Some energy providers may turn down companies with a poor credit history or a low credit score. As a result, the best business energy deals may be challenging to obtain from other energy providers.

They may still refuse to work with you if your credit rating is below a certain threshold:

• Charge an extra fee
• Ask for a down payment.
• Make you pay through Direct Debit.
• Install a prepayment meter

Conclusion

If you pay your bills on time, your credit score will increase. But, conversely, if you don’t pay your bills on time, your credit score will decrease, and you’ll still be a debt risk.

Set up credit with your suppliers. If you work with the same suppliers often and have a good relationship with them, open a credit account with them so that your good payment history with them will show up in your credit file.

Better credit comes from being on time with payments. Not all vendors and suppliers share payment information with business credit-reporting agencies, but you can add trade references by hand. Better to have more positive payment experiences.

Credit card companies and credit reporting agencies can remove lousy feedback from your file. This protects your credit score by ensuring that the information in your file is correct and up-to-date.