Reviewed: 5th June 2015
If your company has been refused credit, first try to find out why you’ve been refused credit. A decision to grant credit or extend credit is usually based on your company’s credit rating, especially if it’s with a new supplier. Potential creditors will usually run a credit check on your company before they offer you any credit. If there’s something in that report which suggests your company may be at risk of not paying then they’ll probably refuse you any credit. If you’ve missed or been late with previous payments, if you have a high level of company debt or your company has any CCJs issued against them, then these can all affect your credit rating. It’s easy to get up-to-date information on your credit rating and it’s worth checking to see if it’s accurate.
You may already know why you’ve been refused credit, especially if you’ve been refused more credit from an existing supplier. This may be because you’ve defaulted on some payments to them in the past and they consider you high risk. If it’s an existing supplier, firstly make sure all previous balances are settled. Could you reduce the amount of credit you’re asking for? They may agree to a smaller credit limit, but you must stick to any payment due dates in order to rebuild their trust in you and your company.
Rather than looking for more credit to help manage your cash flow, have you considered invoice discounting or factoring? Invoice discounting and factoring can be useful financing tools for businesses. This type of financing releases funds to your company based on the invoices you’ve issued. Typically you’ll receive between 85-90% of the value of an invoice within 24 hours of you issuing it, with the remaining amount being taken for the financing company’s fees. Invoice discounting and factoring are very similar as they both release funds based on the value of an invoice. The main difference is that with factoring, the factoring company takes control of the sales ledger, they chase the customer for payments and deal directly with your customers, whereas with invoice discounting your company remains in control of the sales ledger, payment chasing and invoice processing, so your customers don’t need to know that you’re using such a facility.
If your cash flow problems are getting too big for you to manage, then you need to seek professional advice. Speak to an insolvency practitioner to see what other options may be available to you. We have an extensive network of 55 offices offering confidential director support across the UK.
4th December 2018
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