Founders who need finance will push for the best deal possible. How can they ensure they do not pay too much to borrow?
Raising funds is a fact of business life. Whether you borrow from family and friends, a bank or another lender, starting a business almost always means owing someone more than just a favour.
As your business matures, there are many other reasons why you will need to borrow: covering inventory, buying equipment, or buying the premises in which you operate. When you begin looking for finance, you may find that the deals you are able to get as a company are not what you would expect as a personal customer.
When lenders lend, they need to know the risk of giving you the money: the best deals go to the best customers while bad or unknown customers pay through the nose. Lenders use a business’s credit score to work out whether they are prepared to lend and what it’s going to cost. This credit score is a sort of bottom-line judgment on your business.
If you don’t know how lenders see your business, you are not alone: in a survey of Swoop customers, 90 percent of SMEs did not know their Credit Score.
Why do so few business owners have this information? As René Carayol MBE says in Swoop’s report, many founders feel that if it’s bad news, they would rather avoid it: “In the worst business year, why depress yourself even more?”
Andrea Reynolds, Founder and CEO at Swoop, has a different approach: “The fact that so many people are asking for loans, yet so few seem to know so their credit score is alarming… It is the kind of knowledge that every CFO should have at their fingertips.”
The good news is that when you understand your credit score, you can take steps to improve it if necessary. Your credit score is made of a number of factors including:
- The amount you currently owe to other lenders and suppliers
- How much of your available credit you are currently using
- Your payment history, which includes payments made on time, missed payments and deferred payments
- The age of your company and the industry in which you are operating as some industries are deemed riskier than others
Simple ways of improving your credit score include using credit facilities such as overdrafts and credit cards and ensuring that repayments are kept up, or even waiting until your business has hit a milestone before applying for a loan.
Be warned: applying for credit and not getting it is a sure-fire way of damaging your credit score. For this reason, Swoop was built to help businesses, in the majority of cases, know the products for which they will be accepted before making an application.
At Swoop, we feel strongly that a company’s credit score is worth knowing and looking after. So we are offering customers the opportunity to get a free credit report to our Canadian customers. Here’s why you should get yours:
- It’s free but valuable – the information could save you $thousands
- Our check will not affect your credit score – beware, some other services will knock points off your rating
- We will follow up with helpful tips on improving your credit score so that when you need to borrow, you’ll be in a better bargaining position
If that sounds like an offer you should take advantage of, get in touch with us here