Know your score: OnDeck has hit 10,000 scores
Leading online SME lender OnDeck launched its ‘Know Your Score’ online scoring calculator in 2016 and since then has delivered over 10,000 scores to Australian businesses. The platform is powered by leading credit bureau, Equifax.
Recent research by OnDeck confirms that the majority (53%) of SME owners are not aware that a credit scoring system applies to Australian businesses.
Only 47% of SMEs owners know that their business has a credit score. Yet a business credit score is one factor lenders look at when determining whether an SME is eligible for finance – and the interest rate it will be asked to pay.
The independent research conducted by Honeycomb Strategy on behalf of OnDeck’ also found that over three in four (76%) SME owners who are unaware of business credit scores say it would be useful to know their business credit score.
Cameron Poolman, CEO of OnDeck Australia says, “OnDeck research shows that one in four SMEs plan to seek additional business finance in the future, with significantly higher intention amongst larger SMEs. So it’s a concern that there is such a low level of awareness about business credit scores, which can go a long way to shaping the availability and cost of credit for Australian SMEs.
“OnDeck has worked hard to promote our free online credit score service, and the result has been a significant uptick in awareness. Currently 47% of SME owners are aware of business credit scores, up from just 7% in 2018.”
One in ten SMEs achieve top credit score
SME credit scores range from 1 to 1,000, with a higher score indicating a lower risk to lenders.
Among those SMEs that know their business has a credit score:
- 8% had a score of less than 500
- 23% had a score of between 500 – 750
- 27% had a score of between 750 – 1000
- 11% had a score of more than 1000
- Nearly one-third (31%) did not know their actual business credit score.
“SMEs can take five simple steps to boost their credit score. The reward can be improved availability of trade credit, greater access to working capital needs, and lower lending rates,” said Mr Poolman.
Ways to maintain a healthy credit score:
- Pay bills on time
Late payments and defaults can be recorded on an SME’s credit history leading to a lower credit score.
- Carefully manage applications for new credit
An SME’s credit history will display applications for new credit including those that are not successful. Multiple applications can leave lenders asking questions about why an SME may have been rejected for finance by other lenders.
- Maintain a manageable level of debt
Borrowed funds can help an SME seize business opportunities as they arise but the key is to maintain a level of debt that is manageable within an SME’s current and forecast cash flow.
- Recognise the merits of different types of credit
Using long term debt to meet short term business needs can lead to cash flow problems and unnecessary interest charges. Review the balance sheet, look at how different credit options are being used, and aim to match cash flow needs with appropriate finance strategies.
- Monitor the SME’s credit score
Take advantage of free credit score calculator provided by OnDeck Australia. OnDeck’s alert service allows real-time monitoring of any changes in the business’s credit score, allowing the business owner to keep tabs on the venture’s credit worthiness.