NOTE BORROWING TERMS ACCURATELY
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Information about your company could make or break your efforts to obtain credit Bank loans, other than the portion falling for payment inside one year, which are included in overdraft values, will have an effect on the working capital position. Remember that your supplier is interested in ascertaining whether your company can repay them.
Working capital is a measure of cashflow, so it follows that negative working capital (where current liabilities exceed current assets) will be taken into consideration for a credit rating. As current assets are principally assets that can be easily converted into cash, a negative working capital position raises a few concerns. It indicates that the company could be suffering from a cashflow problem, or is overtrading. At the very least, it would not be able to meet all its current liabilities from readily available funds.
Having dealt with the publicly available information from Companies House, it is also important to pay attention to current trading relationships. Pay suppliers within agreed terms – in today’s economic environment more and more trade payment data is used by credit agents as a guide to current creditworthiness.
More obviously, avoid negative information about your company such as county court judgments or petitions for winding up. With the current market conditions and in the prevailing ‘rescue culture’, there are more avenues for mediation than ever before. It is interpreted as a sign of financial stress if a small company incurs a series of county court judgments.
Consider what information is available to your potential credit supplier. They need to be able to judge whether they will get their money and will use a variety of sources, including a credit reference agency report.