How to increase the creditworthiness of your business
Up to 70% of Swedish companies feel that lack of access to corporate finance is an obstacle to growth. Therefore, new ways of assessing companies are needed. Broda’s credit rating is based on a high degree of automation and a completely digital process. In this way, Broda can make a fair assessment of your business without having to ask for a business plan, forecasts or budget.
“We started from the customer’s everyday life, where there is very little time left for administration. Our customers do not have time to attend meetings, write business plans or answer a lot of questions, ”says Olivia Morsetti, one of the founders of Broda. “We strive for as simple a process as possible, while at the same time seeking good evidence for a credit assessment,” Olivia continues.
What makes a company creditworthy in Broda’s model?
Broda’s credit process is tailor-made for small businesses. This makes the assessment look different from other lenders, which are based on collateral in the company or the entrepreneur’s personal finances. Broda’s credit model instead provides a predictable cash flow. That is, stable revenue over time and sales that follow expected seasonal variations.
A healthy financial behavior is also seen as a positive signal in the credit model, with order and track of payments and reporting as well as a moderate debt.
5 Things You Can Do To Increase Your Credit Rating!
Order and find out
Make sure you always have full control of the company’s finances. Pay invoices and salaries on time and make sure to report and pay VAT, tax and employer contributions to the Swedish Tax Agency on time.
Review your margins and liquidity
Make sure you pay enough to have a good margin against your running costs. Do not incur fixed costs for which you do not have coverage. If you are heading into the off-season, be sure to plan your liquidity so that you still have coverage for your fixed costs.
Separate your personal finances from the company
Make sure to get a separate bank account and debit card for the company. Pay only costs related to the company with the company’s debit card. Should you need to send money to the company from your private savings, count on how much is needed and would rather make a larger transfer than many small ones to more clearly separate your private money from the company. If you take out pay, try to withdraw the same amount each month so that your personal finances will be less dependent on how the company is doing for a certain month.
Review your financing
A well thought out financing strategy for your business increases your credit rating. Financing should be a way to increase revenue and profitability in your business, not a way to cover up your business being unprofitable. It can be anything from owner contributions (share capital or owner loans) to various forms of external financing. Calculate how big your total financing is, review terms and calculate what the financing costs for your business. If you have several different forms of financing, think about what the purpose of the financing is (investment or liquidity). By taking a holistic approach you have a better opportunity to create a conscious financing strategy. Maybe you can better plan when in the year you need financing? Maybe you can exchange expensive financing for cheaper or better terms? Do you have several forms of financing, maybe you can collect everything in one place to get better price and terms?
Keep your customers happy
Satisfied customers mean repeat customers. And repeat customers mean stable and predictable revenue. Satisfied customers also usually generate new customers by telling someone they know or writing a positive review on the internet, which leads to increasing revenue. The fact that your business is growing steadily is of course positive for your creditworthiness and in addition, increased turnover leads to a larger loan space.