There are a wide range of things that can affect the type of energy contract the energy suppliers can offer you. These include the number of employees you have, the industry your business is in, the location of your business, and the size of your business. Another crucial factor that also plays a significant role when it comes to an energy supplier offering you an energy contract is the credit score of your business.
Remember that you have to be on top of your business finances to have a great credit score. Besides, switching energy suppliers by using Utility Bidder can help you achieve this. This is because they can get you the cheapest business energy deal so that you can save cash that you can use to pay off other debts. As a result, this can improve your credit score. This post discusses how your business credit score can affect your energy contract.
A business credit score
A business credit score is simply a number that indicates the creditworthiness of your business. Just like a personal credit score, the credit rating that your business has is based on risk. If your business makes late payments or misses payments on a business loan or even a business credit card, it can be considered to be a huge risk to lenders and this can reflect in its credit score.
And, the same thing applies if you have a startup business and decide to open a business credit line for the first time. Remember that credit reference agencies as well as lenders may not have previous information to help them base their decision, so they can assume that your business risk is a bigger risk than established businesses with a good credit history. In such cases, they can base their decision on your personal credit score, though this tends to depend on the lenders and the types of business finances you are applying for.
There are several reasons why energy suppliers can check your credit rating. When you decide to get a business energy deal, your energy supplier can purchase enough energy so that they can cover your energy consumption during the duration of your energy contract, which can be one to five years. Your business can then pay the energy supplier the energy it uses.
This means you enter a form of a credit agreement with the energy supplier. As a result, an energy supplier can lose money if you fail to pay your energy bills. This is the reason why many energy suppliers consider your business credit score when they decide to offer you an energy rate.
They can use your business credit score to assess the chances of you to pay your business energy bills, so this can have an impact on the energy rates they offer you. Your current situation and credit score can even mean that some energy suppliers may refuse to give you an energy contract at all. This is something that several business owners are now struggling with nowadays.
Energy suppliers can have different criteria on how they can use your business energy score. This means there is no exact number they can use to determine your business creditworthiness. Therefore, an energy supplier can accept you if the credit score for your business is more than 40. In such cases, an energy supplier can offer you cheaper energy rates.
In other words, when the credit score for your business is lower, you can have fewer options, meaning an energy supplier can give you higher energy rates. Energy suppliers do this so that they can protect themselves from the risk of your debt. Similarly, lenders also offering business and personal finance deals can charge you more interest rates if you have bad credit. Unfortunately, high energy rates can contribute to your business financial problems, so you need to find an excellent energy deal and avoid getting into expensive out-of-contract energy rates.
The factors that can affect the credit score of your business
If the credit score of your business is poor or your business is in a high risk industry or has a limited credit history, then you have limited options when it comes to choosing an energy supplier. Some energy suppliers can refuse to offer energy contracts to a business with bad credit while others may provide higher energy rates or charge an extra premium. You can also find some energy suppliers that can ask for security deposits. This means you can pay the business energy bills through direct debit or an energy supplier can install a prepayment meter for your business.
Besides the business credit score, energy suppliers can also consider other things to work out the energy rates they can give you. These include the size of your business, the industry it operates in, the average annual energy usage, the number of sites and location, your current energy supplier, and many more.
Your energy supplier can also consider the standard industrial classification number. This is a five-digit code utilized to classify a variety of businesses and offer a wide range of statistical data depending on economic activity.
The standard industrial classification number classifies some sectors of the industry as a high risk compared to others. For example, a business in the hospitality industry can have a high turnover of staff and management, and operate in a seasonal and volatile market. Therefore, there is a certain level of uncertainty that can worry the energy providers and may affect the energy contract they can offer you.
There are several factors that can have an impact on your business credit score. This includes the size of your business, meaning the number of employees working for you.
The way you pay your energy bills can also affect the credit score of your business. If you fail to pay your energy bills, then you can have a lower credit rating. The finance applications you make can also affect the credit score. The number of times you submitted applications for finance both successfully and unsuccessfully tend to affect your credit score.