How to use credit to maximise and maintain your small business

Fluctuations in cash flow are normal for most small businesses. However, untimely or extended gaps in your income can lead to deeper problems that could affect your longevity.

By using business credit responsibly (i.e. only borrowing what you need and repaying it on time) you can give your business the investment it may need, whether that’s to maintain a steady cash flow or to fund its expansion.

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How credit can help small businesses

From loans to credit cards, there are plenty of business credit options to explore. But, as with any strategic business decision, planning is essential. Your cash flow forecast should tell you whether you’ll need extra money coming in.

If your cash flow forecast suggests that you’re at risk of running out of cash, business credit could help you stay afloat 🚣 It can be used to:

  • Make payments on time: Pay short-term bills, bank payments and other obligations so you don’t fall behind
  • Cover your operating costs: These are things like employee wages and inventory – think of those essential expenses that need to be paid
  • Plan ahead: A positive cash flow gives you the ability to move money into areas of your business that need more resource

If you’re looking to expand but your cash flow forecast says you don’t have quite enough cash, business credit could help you grow 📈 It can be used to:

  • Pay for extra expenses: To grow, you’ll likely need to invest in more inventory, employee training, new equipment… the list goes on!
  • Become more flexible: A positive cash flow gives you more confidence when making large purchases
  • Access better terms: You might be able to negotiate more favourable supplier terms if you can provide more cash upfront

Don’t make this business credit mistake

It’s best not to apply for lots of credit products within a short space of time. You’ll damage your business credit score as lenders will assume that you’re relying too heavily on credit.

This rings especially true if you’re a newer business. You’ll probably get rejected because you have a low score due to the fact that you haven’t had much time to build it up. It’s no different if you’ve been up and running for a while, but have a low credit score due to missed loan repayments in the past or failed credit applications.

When you make credit applications with a low business credit score, you’re damaging your already poor score and wasting time on applications that will probably get rejected at the same time. If they don’t get rejected, you’ll likely only be offered options that come with high interest rates.

The better your credit score, the better your credit options

Experian credit score scale

A good credit score means lenders will deem you as a lower risk of non-repayment. That means you’re likely to be eligible for more credit options and competitive interest rates.

Having a good credit score doesn’t just mean you’ll get the best credit. Your credit score is usually taken into account when you’re applying for insurance, negotiating supplier terms and arranging contracts and tenders. That’s why it’s so important to maintain a healthy credit score at all stages of your business. 

So, make sure your business credit score is in its best shape before starting any applications. Head to your Tide app to see your Experian business credit score in a few taps.

Business and personal credit scores are separate 

Having a good personal credit score doesn’t mean you’ll have a good business one. Here are the key differences between the two, and you can read more in our blog post which explains everything you need to know about your business credit score.

Your business credit score… Your personal credit score…
Is public: Lenders, business partners, vendors and other stakeholders can see it Is private
Is based on your business’s financial history, such as business loans you’ve taken out Is based on your non-business credit such as mobile phone contracts and mortgages
May differ depending on the credit reporting agency you use because there isn’t a standardised system for calculating business credit scores Should be roughly the same across all credit reporting agencies because it’s calculated using a standardised system
Is taken into consideration by lenders when you apply for business loans from them (if you’re a limited company) Isn’t usually taken into consideration by lenders when you apply for business loans from them (if you’re a limited company)

Two ways to open up your credit options

At Tide, we’re here to do the hard work for you. Get creditworthy with minimal effort and see credit options you’re eligible for without wasting time scouring the market, using these two credit features in your Tide app.

1. Build your credit for less than £33

If your business credit score needs a bit of work, you’ll need to build it up before applying for business credit. We’ve developed our Credit Builder feature to help you do just that!

It works like a ‘reverse loan’, to help you demonstrate your lending potential by reporting monthly loan repayments to Credit Reference Agencies. By making payments on time and in full, you can help improve your business credit score for your future finance applications. You can track your credit score’s growth at any time in your Tide app, too.



2. Open a pre-approved line of credit

Got your credit score under control? Taking out a line of credit could be the next step. 

A line of credit is an agreed amount of money that you can borrow from and repay, as needed. With extra cash in your hand, you can maintain a consistent cash flow and supercharge your growth.

That’s where Tide Credit Line comes in. You can see your pre-approved Credit Line amount, the annual interest rate and the subscription fee before you activate it. No hard searches will be left on your business credit file, either.

Fund your working capital and build your credit score with Credit Line - Activate your pre-approved line of credit - Use the funds you need when you need it Check eligibility

Fund your working capital and build your credit score with Credit Line. Activate your pre-approved line of credit. Use the funds you need when you need it. Check eligibility.

Wrapping up

Business credit is one option to consider as part of a wider financial plan. It can be used to finance growth or maintain a healthy cash flow. Remember, before applying for anything, make sure you have a good business credit score and have researched all your funding options.

Amina Sinclair-Diallo

Amina Sinclair-Diallo

Midweight Copywriter

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