There are a number of reasons as to, why many business owners may need credit. By credit we mean a business loan or a credit card. either way your business credit rating will form on the basis of the decision as to whether you are accepted or not.

What is Business Credit Rating?

A business credit rating forms in the same way as personal credit scores. A business credit score is built on the financial history of the business. The lenders will use these scores to determine if a business is likely to meet repayments.

Many businesses choose to open a business account, apply for a loan or get a mobile phone for business use, all of these will be affected by the business credit score. This can have an impact on whether you are accepted or not. This can also have an effect on the rates you are given.

For many reasons if you have a low business credit score, this could be because you may not have made several payments, then you might struggle to gain the funding you need for the business. You may be given interest rates which are a lot higher than those promoted. Therefore it is very important to have a great credit score.

Where Can You Find Your Business Credit Score?

Firstly, there is no single business credit score for your business. Therefore, there are a number of credit reporting companies, they all use their very own scoring methods. Lenders will opt to use different credit reporting companies when they need to determine your credit score.

As Accountants in Telford and Wellington, we have advised number of business on issues relating to their credit scoring and how to get it better. Call us if you need any advice related to your personal needs and circumstances. 

Enhancing Your Business Credit Score

As your personal credit score, there are a number of things which you can do to improve your business credit score.

Firstly, check your rating. It is common for slipups to be made and so, you can help identify these and ask for relevant corrections to be made.

Secondly, open a business bank account in the name of your business this may help take out business credit e.g. a credit card or an overdraft. However, it is very important that you ensure all repayments are made on time.

It is important that you file all complete accounts with Companies House on time. Having your accounts audited can help too. All bills and credit cards associated with the business should be paid on time. If you have accounts that are no longer in use, close them. The more you have open, it could be seen that you need all of that credit and weaken your rating.

Finally, try to keep your applications for credit to a minimum. If you get rejected by one, then don’t apply for another straight away. The more applications made, the more desperate you can look and that can have a negative impact on your rating.

There are a number of different types of limited companies within the UK that can be set up. There are several different factors which will help to determine what is right for you.

Private limited company – limited by shares (Ltd.)

This is a private company, which means the public is not able to purchase shares of the business. The shareholders are liable for the percentage of investment they have made in the business. E.g. if someone makes a 20% investment, they are accountable for 20% of the business. This is the most popular form of limited company in the UK.

Private limited company – limited by guarantee (LBG)

Generally, this type of company is a non-profit business or can be a charity. This means individuals are not responsible for their share of investment because there are no shareholders. There is a board which will be responsible for debts, they will act as guarantors. They will pay money to cover debts when required.

Public limited company (PLC)

In many ways, this is very similar to a private limited company, limited by share. However, the real difference is,  it will offer its shares to the public. Therefore, members of the public can hold shares in the company and with this comes more legal obligations. In order to go public, a company will need two directors as well as two shareholders including a company secretary and a minimum of £50,000 of issued share capital.

If you are local in Telford and Wellington and would like to have free advice about the structure of your business or potential business, call office for free advice.

Limited liability partnership (LLP)

This works in a similar way to a limited liability company, limited by shares but there are partners instead of shareholders. The partners are responsible for an equal part of the business as well as their share of the business.

An example is, if a business has five partners, they will each be responsible for 20% of the business, this will also include any debts. It’s a perfect structure if the partners want to have an equal share in involvement. Partners will also actively manage the business which is different to those businesses that have shareholders as they need to vote in order to elect a board of directors who then decide who should run the business.

Private unlimited company

There are no requirements for a private unlimited company to submit financial statements or even an annual as limited companies do. This means that a private unlimited company can remain private. The structure will not have shareholders who have to take responsibility for their percentage of investment in the business. Therefore, all shareholders are responsible for business liabilities. If the business was to face any difficulties, they would be required to share the burden equally. This is not a common form of a limited company.

If you are considering becoming a limited company, then Tax Accountants in Telford and Wellington are on hand to help and assist you where ever required.