Factors that affect the credit rating of a company

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The credit rating of a company is a key deciding factor in terms of qualifying for access to credit or not.

Having additional finance is often a key part of running an organisation, because it not only enables expansion but it also enables credit standing improvement, which will benefit it in future. It also has the potential to enable attraction of new investors. 

Even though there are numerous ways to raise capital, applying for credit can be quite useful. If there is a cash flow issue to sort out and an organisation needs cash immediately, waiting for angel investors isn’t going to cut it. But having a stellar rating may facilitate the loan approval much faster.  

With each credit application, the credit rating of a company is affected. In addition, there are various other factors playing a role in how this rating is calculated. 

Factors that affect how a business’ credit standing is rated include: 

How fast it pays creditors back 

The rate at which creditors are paid back is typically a good indicator of how well or poorly it will manage its repayments. By assessing how a company’s debt is structured, it can be a good way of examining if it will afford any additional credit.  

Business size 

The size of the organisation, its reputation, history and how it is organised are key factors. How long a business has been operating also affects decisions. 

How much credit it has 

If an organisation has applied for additional finance within the previous 9 months, this may have an effect on decision-making. Having excess credit will have a negative effect because of the risk that is involved. If a lender is of the view that you won’t afford repayments, then they aren’t likely to offer access to credit.

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