Why Are Business Credit Reports Important?

Monday, 15 Mar 2021

The credit report is avital document that informs about the creditworthiness of the entity to the moneylenders and financial institutions. It helps the lending party decide whether they will be able to retrieve the payback instalments or not.

The credit report has all the relevant information to allow the lender to make the final decision. Without this report, they cannot establish the credit score and the financial well-being of the business.

Thus, if you are a small business owner who is currently in need of a loan or may require investment from other prominent players in the market, you should rely on a professional bookkeeper in Melbourne to improve your business credit score.

The numeric value can get you the desired loan amount without any hassles to grow your company with the additional capital. It also helps to get favourable terms while applying for a loan. Let us help you understand the significance of the credit report in detail.

What Is A Business Credit Report?

The business credit report gives information about the financial health of the business in Melbourne and includes all the details about the expenses of the business, such as debts, mortgage payments, delayed bill payments, outstanding utility bills and more.

It comprises all the information about the company, its trade history, and bankruptcies. The business credit score is the value that is obtained from the credit profile based on the credit history of the business.

The value ranges from zero to 1200.If your entity falls in the 0-509 segment, it has a poor credit score. Conversely, falling in the833 to 1200 segment denotes an excellent credit score. The credit report is maintained by a credit reporting body, and some of the well-known agencies in Melbourne that offer credit score are Equifax, Experian and million.

The creditors of a business send the debt information to the reporting body. A good score lies in the range of 622 to 725, and the range of 726 to 832 showcases an even better score. Your bookkeeper can help in improving the score by obtaining the full credit report from Equifax.

It offers all the details, such as outstanding payment to a supplier, which impact the credit score. However, a bookkeeper does not let this happen by keeping track of all the pending and upcoming payments and making them on time to avoid delay or penalties.

Once the bookkeeper resolves the issue, it is removed from the credit history, and the score is automatically increased. Thus, hiring bookkeepers not only reduces the time spent on accounting work but also enhancing the credit score.

Why Is Credit Report Important?

The credit score is relevant for securing loans and a variety of other reasons, and they are listed below.

Qualify for Bank Loans Easily

Most moneylenders examine the business credit report and other financial documents like the balance sheet, cash flow statement and the profit and loss statement. It is not easy to get a business loan, and many entrepreneurs in Melbourne have to face rejections from banks.

To avoid rejections, most businesses strive to have an excellent credit score with the help of their bookkeepers. It helps them to get the loan approved quickly and without much trouble.

Enjoy Favourable Loan Terms

With a high credit score that can be effectively achieved by your bookkeeping company, you can negotiate with the lenders on the loan terms. A good score ensures your creditworthiness and helps the lender to trust you and confidently lend the required capital.

Better terms include getting a lower interest rate and a significant loan amount for your business in Melbourne. The lower interest can help in reducing the burden of debt and help you save money. The bookkeepers make sure that the business gets funding from lenders who report to well-known credit agencies so that the score is built accordingly.

Make More Purchases on Credit

As an entrepreneur in Melbourne, you not only have to apply for business loans but also make payments to your suppliers. If your credit history showcases a positive picture of timely payments without any defaults, the suppliers will be willing to offer credit deals.

Your bookkeeper will help in negotiating with the suppliers and ensure that the business does not have to make advance payments and can make the purchase of inventory or machinery on credit. It also helps in enhancing the cash flow.

Positive Response from Investors

Besides banks and financial institutions, businesses in Melbourne opt for funding from angel investors and venture capitalists. Maintaining a good credit score helps in attracting high net worth individuals for investing in the business.

These people may not be willing to take the risk with an entity that displays a poor credit score. Thus, if you are planning to expand and scale your business, you must ask your bookkeeper to work on improving the credit score.

How to Build A Good Credit Score?

Since a good credit score in Melbourne can work wonders in getting more funding and expansion, an entrepreneur must develop the habit of maintaining it. Your bookkeeper can help in this regard by following the tips mentioned below.

  • Bring Down the Debts

The bookkeeper works relentlessly to reduce the debts, and it involves making payments on time and avoiding late payments. He ensures that all the financial obligations are met to maintain a strong credit history. Thus, all the invoices and credit card bills are duly paid. Also, he works on repaying old loans as quickly as possible to raise the credit score.

  • Keep Track of the Score

The bookkeeper is responsible for keeping a tab on the business credit report. If there are any fluctuations due to a default or fraudulent activity, he springs into action and brings it back on track by taking care of the problem. The issues that can crop up include bounced cheques, negative cash flow, high credit utilisation, several credit accounts, etc.

  • Do Not Cancel Old Credit Accounts

The credit history of the business is of the utmost importance when looking for financing, and that is why you should not cancel old credit accounts in Melbourne. These help in making the lender aware of the repaying capacity of the business and its past record.

Conclusion

The business credit score is a vital numeric value assigned to a business on the basis of its credit history and aids in getting funding in future. Therefore, bookkeepers in Melbourne are extra cautious about maintaining the perfect score to gain a preferable position in front of investors, moneylenders, and suppliers.

 

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