The credit score is one of the most practical and at the same time most valuable indicators that financial institutions can consider, to determine whether or not to grant resources to an applicant company. For this reason, it is important that businesses take great care of this aspect and worry about maintaining a high score.
A simple number in the credit analysis can be the difference between having capital or losing the possibility of obtaining financing, by representing a risk for lenders.
What is the credit score?
The credit score is the numerical rating assigned to an individual or company, derived from the record of all their loans, credits and payments. It has credit card and invoice information, among other crucial elements within credit analysis.
When a company looks for financing sources for SMEs, lenders look at the score to find out if it is preferable to decline the request or if it is convenient to grant the capital to the applicant and under what terms the agreement will be agreed. For this reason, it is important both to obtain financing and to obtain good conditions.
How is it calculated?
Usually, a credit score ranges from 350-400 to 850 points. The closer the score approaches the perfect score of 850 points, the greater the chances that the requested funding will be awarded.
A business that is close to half is likely to be able to obtain financing sources for SMEs under criteria that are not so convenient, without many facilities or with high interest.
The way it is calculated is normally:
- 35% history of payments made.
- 30% amounts owed.
- 15% time managing credits.
- 10% mix of credit products.
- 10% inquiries made.
How to improve it?
In order for a business to improve its score, it must take the following into consideration.
Check credit analysis
When reviewing a company’s credit report, it can be verified that the data contained is correct, from personal information to company balances. An error in the data can negatively affect the score.
Pay bills automatically
A prolonged or sustained delay in the payment of invoices can affect the corporate image of a company, which is reflected in the score. For this reason, it is best to establish automatic payments that allow you to maintain an impeccable calendar.
Try not to have many active debts
Having too many debts activated, resorting to too many sources of financing simultaneously, can be an indicator of a company that does not manage its resources in a good way.
Don’t close old accounts
The more longevity the accounts have, the better the credit score will be. Furthermore, the analyzes will be stronger and will contain more valuable information for financial institutions.
Do not request credit too frequently
Applying for a funding source can be very convenient. However, doing it too frequently can lead to a rapid accumulation of debt. This indicates that there are capital problems in the company and thus lowers the score.
Online loans, without complications
If the performance of your company is good, but it is too young to have a solid credit history and therefore its score is not yet well established, online loans from Pymes Capital can be a great option to obtain financing.
The MCA or business cash advance model is ideal for start-ups that need resources and are looking to build good credit at the same time.
Through a simple and fast online application process, you can access financing from Pymes Capital.