3 THINGS YOU MUST DO BEFORE APPLYING FOR BUSINESS FINANCE Funding and Business Growth Playbook T: 0330 350 3356 @: hello@GrowingYourNumbers.com www: growingyournumbers.com
It is not just lenders who use the Credit Ratings Agencies:
• Suppliers use Credit Ratings to track the credit worthiness of their customers. This includes some less obvious suppliers, for example insurers, utility companies, landlords, as well as the suppliers you rely on for the raw materials and labour you need to build your finished product ready for sale. If your credit rating is downgraded, possibly without you knowing, you may suddenly find your credit limits are substantially reduced for no apparent reason, or worst, you may not be able to obtain goods or services on credit and will need to pay cash in advance to continue trading.
Impact: Creditor days reduced = a potentially major and immediate cash flow problem.
• Buyers also check the Credit Ratings of their suppliers to minimise the risk to their continuity of supply which means customers could stop buying, reduce purchase volumes and/or bring in other competitive suppliers, introducing even more price pressure. What would happen if your customers started to reduce the volume they purchase from you, or as a result of evaluating other potential competitive suppliers, they were to reduce the prices they pay and hence reduce your gross profit margin?
Impact: Sales Volumes and Profit margins could be reduced = the perfect storm
• Public Sector and other organisations regularly put work out to competitive tender. When they do so, part of their ‘due diligence’ will include regular credit checks on the companies they invite to tender. Professional buyers will protect their own position and that of the organisations they work for by only allowing suppliers with a good credit rating to remain on their tender list. If your credit rating gets downgraded, you may suddenly find you have been removed from tender lists.
Impact: Sales opportunities dry up making it harder to maintain turnover levels = still more pressure and an ever worst and deteriorating revenue, profitability, and cash flow problems.
• Lenders avoid unnecessary risk. If your company credit rating is poor, it is extremely unlikely you will be approved for debt funding unless you are able to provide personal guarantees or you can borrow against assets such as buildings, stock, machinery, outstanding invoices or the like…
Impact: If you need cash to run payroll at the end of the month, this could be game over. At best your options for investment and growth have just become significantly more limited.
Funding and Business Growth Playbook ^N0 V1.1 (GYN FO).docx | Confidential
Page 9 of 47
Growing Your Numbers is a trading style of VFD Pro Ltd © VFD Pro Ltd, 2021. Registered in England and Wales No. 11210237
Registered Office: 20-22 Wenlock Road, London, England, N1 7GU
Made with FlippingBook Learn more on our blog