Over 10,000 Australian small business owners have used OnDeck’s free online credit score calculator to gain new insights into their venture’s financial health.
Many Australians know they have a personal credit score. What’s less well understood is that businesses also have a credit score. Yet it can play a key role when it comes to securing commercial financial.
Independent research conducted for OnDeck found the majority (53%) of Australian SME owners are in the dark about business credit scores.
However, awareness is growing.
Currently, 47% of SME owners realise their business has a credit score – an uptick of 5% over the last 12 months.
9 out of 10 SMEs score well
It turns out that Australian SMEs typically have quite healthy credit scores.
Of the 10,000 business credit scores provided by OnDeck’s online credit score tool, the average score was 763, which is regarded as ‘very good’.
Close to nine out of ten (86%) SMEs achieved a score of ‘good’ or above.
Why it matters
OnDeck Australia has worked hard to promote its free online credit score service – and with good reason.
As Cameron Poolman, CEO of OnDeck Australia points out, “Our research shows that one in four SMEs plan to seek additional business finance in the future, and business credit scores can go a long way to shaping the availability and cost of credit.”
Nurture your number
Fortunately, there is plenty that business owners can do to boost their credit score, and as Cameron Poolman explains, “The reward can be improved availability of trade credit, greater access to working capital needs, and lower lending rates.”
Here are five steps your business can take to maintain a healthy credit score:
1. Pay bills on time
Late payments and defaults can be recorded on an SME’s credit history leading to a lower credit score.
2. Carefully manage applications for new credit
An SME’s credit history will display applications for new credit including those that are not successful. Multiple applications can leave lenders asking questions about why an SME may have been rejected for finance by other lenders.
3. Maintain a manageable level of debt
Borrowed funds can help an SME seize business opportunities as they arise but the key is to maintain a level of debt that is manageable within an SME’s current and forecast cash flow.
4. Recognise the merits of different types of credit
Using long term debt to meet short term business needs can lead to cash flow problems and unnecessary interest charges. Review the balance sheet, look at how different credit options are being used, and aim to match cash flow needs with appropriate finance strategies.
5. Monitor the SME’s credit score
Take advantage of free credit score calculator provided by OnDeck Australia. OnDeck’s alert service allows real-time monitoring of any changes in the business’s credit score, allowing the business owner to keep tabs on the venture’s credit worthiness.
To check your SME’s credit score, click here.