Business Energy Based On Your Company Credit Score

Company managers should not forget the link between their business credit score and the price of energy. A business credit score has such an enormous impact as it will determine who your supplier may be, what options are available to you and the tariffs you can choose from. To get the cheapest business energy deal, you will want to ensure your company has a good credit rating.

In this guide we hope to give you a better understanding on what your business credit score is, how it affects the price of energy and what steps you can take to improve it.

What is a business credit score?

As an individual, you have likely come across credit scores in the past. However, your business credit score works differently from your personal one. This score is calculated by looking at a number of different factors, most notably, how likely it is you will be out of business within the next 12 months.

All companies are rated on a scale of 1 to 100. As expected, having a higher score is far better than having a lower one. Companies that are in a stronger financial position will naturally have a higher rating. You can get cheaper business electricity and gas rates if you have a rating of 40 or more.

What factors affect your business credit score?

There are a number of different factors that can affect your business credit score. Here is a list of some of the various factors at play that determine your company’s credit rating:

The size of your company

The size of your company is typically understood to be based on the number of employees you have. The larger your firm, the more options you have available to you, pending you’re not in large amounts of debt.

Previous bill payments

Payments made towards previous bills also count towards the overall credit score. Anyone who has struggled or failed to pay a bill on time will likely have a lower credit rating. Where possible, set up a Direct Debit to ensure that you’re not making late payments.

Applications for finance

This involves looking at the number of times your firm has applied for finance in the past. Both successful and unsuccessful applications will be considered. As you may expect, the more applications that you are accepted for, the more likely it is to increase your business credit rating, and any applications that you have been turned down for will decrease your business credit score.

Group memberships

If your company has joined a group, other businesses included within this group will also have an impact on your overall credit score. For this reason, it may be worth scrutinising another company’s financial records before entering into any of these collective group memberships.

The company director’s credit history

The company director’s personal credit history is also taken into consideration. If his/her credit history isn’t particularly great, this good have a negative effect on the business’ credit score. Multiple directors will mean multiple checks.

Why do commercial energy suppliers check credit scores?

In order to secure regular payments, business electricity and gas suppliers will check your company’s overall credit score. By looking closely at your rating, if they feel that there is a possibility that you may default, they will not offer you their best rates.

This is primarily because of the fact that energy is used in enormous quantities and is relatively expensive to produce and transport. If you were to miss your monthly (or quarterly) payments, this could significantly harm a provider’s business model.

It is also worth noting that some industries are classed as a higher risk in comparison to others. A common example is the restaurant business. This is because they typically tend to have a high turnover of management which creates a lot of uncertainty. Suppliers are extra cautious of this and use this information to decide upon what rate to offer or not offer.

To get better commercial energy quotes and save money on your gas and electricity bills, check out our top tips.

What happens if I have a bad credit score?

If you don’t have a great credit score, this isn’t particular good for your company, as you may be deemed as a higher risk client for business energy or any other services you may require. Having a weaker credit rating decreases your options and your choice of suppliers and energy tariffs will be limited.

Furthermore, some energy providers may simply choose not to supply gas and electricity to a business that has a poor credit history. In addition to this, other providers may refuse you access to their best commercial energy tariffs. This can be particularly frustrating.

At this juncture, it is also worth mentioning that should a supplier accept a company that has a low credit rating, they may still choose to do any of the following:

  • Ask for a large security deposit
  • Increase the premium
  • Install a prepayment meter
  • Request that you only pay via Direct Debit

How can I Improve my business’ credit score?

There are a number of ways you can improve your business’ credit score to secure a better energy deal. Here’s how:

Make sure you pay your bills on time

Paying your bills on time, whether its loans, utility bills or other business costs, is one of the quickest and easiest ways to improve your company’s credit score. Those that are unable to pay their bills on time will learn that their credit score will suffer as a result of this. No matter what else you try, other businesses will deem you as a high-risk client and may not want to work with you in the interim.

Establish credit accounts with suppliers

Some companies will work with specific suppliers on a regular basis, and here we’re not just referring to gas and electricity suppliers either. By building a strong and healthy relationship with these suppliers, you could establish a credit account with them which can help your credit file show these positive payment experiences.

Add positive payment experiences to your credit file

It should be noted that not every supplier or vendor will disclose payment data with business credit reporting agencies. However, you should be able to add trade references to your company’s credit file manually through the credit reporting agency. Add as many positive payment experiences to your credit file as possible, this will really help you out in the years to come and should raise your business credit score.

Dispute any errors or false inquiries

If there are any errors, false inquiries or negative feedback on your file, you will in fact be able to work with credit card companies and credit reporting agencies to get these removed. This will ensure that your file is accurate and up to date without any discrepancies. If the previous information is incorrect or no longer relevant, your credit score will certainly benefit once the amendments have been made.

Lastly, if you are in business energy debt for whatever reason, check out our guide on the subject and find out how to free yourself of this.