FINANCE
Rachel Emmerson, Business Advisory, Accounts and Outsourcing Senior Manager at Kreston Reeves
Understanding your business credit score It is estimated that before the Covid pandemic only 15% of UK businesses regularly borrowed money and analysis from British Business Bank at the end of the Coronavirus Loan Scheme (July 2021) showed UK businesses had benefited from 1,670,939 government guaranteed loans, worth a combined £79.3bn. Clearly many more businesses have had to take on debt and financial support, perhaps for the first time, to help them through the last two years and many will be repaying this debt for years to come.
Our research, (Shaping your future report, November 2021) showed that 36% of businesses we surveyed reported lower cash reserves in Q4/21 than when entering the Covid pandemic and 20% of businesses that have borrowed from government-backed loan schemes have not been able to or do not expect to be able to repay that money. There will be a number of businesses now with both ongoing and new borrowing requirements, especially as trading in some sectors will continue to face some level of disruption (being,
supply chain, labour and logistics) but now also rising costs of fuel, labour, materials and any uncertain outcomes following the events in Ukraine. If you then factor in three consecutive UK interest rate rises, then the cost of borrowing for many will also rise. Some UK lenders are also reviewing business lending criteria. It is important therefore to put yourself into the best position if you do need to borrow and to understand what you need to do as a business if you want to borrow and/or maintain that ability to borrow or secure credit, on favourable terms. Along with financial forecasting and putting robust business plans in place, looking at some more practical steps such as improving your business credit score is vital. With all this in mind, all businesses need the ability to secure credit, whether this
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