There are two little known facts about business credit scores, the first is how much they can change within a 12-month period, and the second is how quickly even a slight drop in score can start to impact on day-to-day operations. It’s very common for problems with credit ratings to creep up announced, usually only surfacing when a business is prevented from doing something as a result. 

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Lightbulb Credit is the UK’s first business credit improvement service that uses a tried and tested method that gets results in just a few days. To date we have helped over 500 companies and added over £1bn to our clients’ trade credit terms. We work closely with the five main credit rating agencies to spot potential issues and take action quickly. Our service is completely risk-free, as the client only pays if we get results.

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The UK trade credit market

There are several key trade credit ratings agencies in the UK – Creditsafe, Experian, Equifax, and Dun & Bradstreet. These agencies assess your credit rating and publish a score on a scale of 0 -100, this determines your recommended credit limit. The scoring methodology for each agency is different, but all utilise data from Companies House, historical trends, alongside payment data collected from your suppliers to evaluate your payments against agreed credit terms. 

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These ratings and limits impact many areas of your business, construction firms particularly:

1. Working capital, directly impacting your trade terms. 
2. Access to funding and the rates you pay. The higher your business is rated, the easier you can access finance/leasing, and at better rates.
3. Tendering is a significant factor in Construction. Tenders will be judged against your credit rating, gaining, or losing you larger contracts.

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What does all this mean?

These agencies impact construction firms, specifically due to the “working capital-intensive” nature of the sector, along with volatility in market sentiment – recent insolvencies have increased this adverse reaction.

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The slightest drop in score can impact negatively on operations as issues with credit ratings can arrive unannounced, only flagged up when a business experiences an unexpected rejection. This could occur in tendering for a contract, being denied credit terms, or maybe suffering credit terms reduction or removal.

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Why does knowing all of the key ratings matter?

When it comes to trade credit ratings and recommended credit limits, the economic forecast is mixed, with many challenges ahead. However, the construction sector is a key element of the UK economy and traditionally one of the quickest to recover following financial uncertainty. There is also a universal recognition that a strong construction sector in the UK is vital.

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Awareness of your business rating can help you manage working capital volatility, furthermore, understanding how your business is viewed by all the UK agencies is a hugely positive and powerful insight valued by our many clients.

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Knowing your credit rating and having the ability to improve it quickly is a persuasive case for you to contact Light Bulb, but to make the decision compelling, we are offering a completely FREE Credit Insight report, along with a 60-day FREE trial of our unique monitoring solution.

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For those operating in the construction sector, maintaining an awareness of ratings and understanding how they can help or hinder your growth can make all the difference. Reputation is important but doors can immediately close to new projects if the credit score isn’t there to back it up.

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You can read more about Credit Ratings within the Construction Industry here.

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Construction client case study 

One of our construction clients has had great success utilising credit improvement strategically to fast-track sustainable business growth. 

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The business was formed by two senior professionals from the construction industry with more than 45 years of experience between them. Reputationally the business was credible and trusted within the construction industry, but as a new enterprise their company credit ratings were holding them back. 

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Their biggest issue was tendering for work, in particular with Housing Associations. Despite showing impressive growth and stability in their first few years they were frustrated at not meeting the criteria for tenders. With very low credit ratings and limits the credit agencies had categorised them as high risk, preventing them from making the shortlist for tenders, all as a direct result of having limited accounting data filed at Companies House.

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By submitting fresh data to the credit agencies that better reflected their financial position at that time, we were able to get their ratings reviewed. As a direct result of the new information shared, the first agency increased their rating from 17/100 to 47/100 and credit limit from £0 to £21,500, taking them from the high risk to the moderate risk category. The second agency amended their rating from 10/100 to 45/100 and credit limit from £0 to £48,000 moving them from the maximum to above average risk category. 

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These improvements enabled them to immediately tender for and win several multi-million-pound contracts with housing associations, increasing the value of their contracted work five-fold in just 3 years. A great example of how credit improvement can be the catalyst needed for change and growth.

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The credit improvement solution

For many companies, business credit ratings are still very much an unknown quantity and there is a general assumption that they cannot be changed. Regardless of the size of a business, the principles of optimising these ratings are the same, and with a better understanding of them, you can start to proactively leverage them to your advantage. 

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At the moment there are more credit searches going through than ever, as suppliers and lenders remain cautious about the challenging economic backdrop, meaning many more firms are likely to be affected by a sudden drop in ratings.

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Credit improvement can be done at any time and the insight provided as part of the process provides a totally new perspective on how a company is viewed externally, something that is invaluable to any business. 

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It can also be used in a timely way to coincide with planned business activities:

• Prior to applying for funding/investment to maximise the value achieved
• Before tender bids to ensure you meet the minimum hurdle rate
• To improve supplier terms post pandemic
• To release working capital to support growth

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The results for each client are different, but the benefits to our construction clients have been consistent. A better credit score generates a healthier credit limit, improved rates of finance and more chance of gaining access to lucrative public sector work. And at this time, all construction businesses will be looking at how they can achieve these goals.

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Lightbulb have continued to support this construction firm with their growth journey, and more recently assisted them with the specific objective of maintaining their ratings in preparation for transitioning to become an Employee-Owned Trust.

By keeping a close eye on their credit profile, and proactively intervening where necessary to ensure ratings and limits were maintained, the value of the business was fully maximised, and they now have a new company structure that better supports their future growth potential.

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Your Free Solutions

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Get access to 60 Days of Free Monitoring here.

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Or you can get a free credit insight report here.

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If you have any questions about anything discussed within this article please feel free to reach out to us here, or contact James from the Lightbulb Credit team at: james@lightbulbcredit.com

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