Business or company credit

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torrence
torrence Posts: 95 Forumite
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in Small biz MoneySaving
Does anyone know if makes any difference getting credit from suppliers if it is a limted company? The business has not started so we could set up a company. Having done a credit check on the business the score is low so wonder if it is better to set up a limited company before starting a small business.
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  • Mistral001
    Mistral001 Posts: 5,349 Forumite
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    If you are a sole trader, then it is your credit that is low and not the business's.
  • torrence
    torrence Posts: 95 Forumite
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    It was for the business but not the actual credit score, I should have explained better. It was a free company credit check https://www.firstreport.co.uk/Free-Company-Credit-Check.aspx not the same credit score that would be in a credit report on the company but it was useful to see what to expect as a credit rating for the business.

    I suppose it made sense. But I wonder if it will be easier to get credit as a limited company compared to being a new non-limited business.
  • Mistral001
    Mistral001 Posts: 5,349 Forumite
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    edited 17 January 2020 at 11:59AM
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    If your business is a sole trader business the supplier will not be giving credit to the business, but to you personally. Even if you as a sole trader have quite a big business with a large turnover, several employees and a trading name with several brands, you will be personally responsible for all debts that the business might have.
  • Mistral001
    Mistral001 Posts: 5,349 Forumite
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    I just filled in the form giving random information. I got a credit score even though I did not give the name of any company or my own name.

    It looks like the site is just giving an indication for an imaginary business and does not refer to any specific business.

    I now get your problem!

    I am a sole trader and have never had any problem getting credit.

    If you are looking for credit and have a good personal credit score then setting up a ltd company is not likely to improve that rating.

    However, if you deal with large suppliers which are not local, then many of those suppliers will often prefer to deal with Ltd companies, because they can do an internet due deligence search of the business very easily. They can at least confirm that there is a business and get names and addresses of directors verified.
  • Pennywise
    Pennywise Posts: 13,468 Forumite
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    A brand new limited company with no trading history won't have a better credit score. They work out credit scoring by reviewing prior year accounts (there'll be none) and payment history when paying suppliers who use invoice factoring (there'll be none).

    You are likely to get a low credit limit, if suppliers will give you any credit terms at all. You need to buy stuff and pay on time, and then individual suppliers will build up trust in you and be more likely to offer higher credit limits and longer payment terms.
  • HatAndScarf
    HatAndScarf Posts: 41 Forumite
    edited 17 January 2020 at 2:37PM
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    torrence wrote: »
    Does anyone know if makes any difference getting credit from suppliers if it is a limted company? The business has not started so we could set up a company. Having done a credit check on the business the score is low so wonder if it is better to set up a limited company before starting a small business.
    torrence wrote: »
    It was for the business but not the actual credit score, I should have explained better. It was a free company credit check https://www.firstreport.co.uk/Free-Company-Credit-Check.aspx not the same credit score that would be in a credit report on the company but it was useful to see what to expect as a credit rating for the business.

    I suppose it made sense. But I wonder if it will be easier to get credit as a limited company compared to being a new non-limited business.

    As already stated by Mistral001, if you are a sole trader, then it is your credit that is low and not the business's.

    You obviously cannot get a credit file on a company that does not yet exist. Even if you were to set a company up today, it would obviously have no credit history.

    Are you suggesting that your credit file is so bad, that a legal entity with no history at all may have a better chance of obtaining credit? If so, I'm out, as will all self respecting lenders be.
  • HatAndScarf
    HatAndScarf Posts: 41 Forumite
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    Pennywise wrote: »
    A brand new limited company with no trading history won't have a better credit score. They work out credit scoring by reviewing prior year accounts (there'll be none) and payment history when paying suppliers who use invoice factoring (there'll be none).

    You are likely to get a low credit limit, if suppliers will give you any credit terms at all. You need to buy stuff and pay on time, and then individual suppliers will build up trust in you and be more likely to offer higher credit limits and longer payment terms.

    In my experience, if credit is being sought by a brand new limited company, any responsible creditor (assuming, as you say, they will provide credit at all) will seek personal guarantees. :)
  • torrence
    torrence Posts: 95 Forumite
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    No problem with personal credit. More wondering if being a limited company gives suppliers and more confidence compared to a sole trader or partnership.
  • 00ec25
    00ec25 Posts: 9,123 Forumite
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    torrence wrote: »
    No problem with personal credit. More wondering if being a limited company gives suppliers and more confidence compared to a sole trader or partnership.
    no it does not


    as explained, until the company has a history of proven management of its payments then it is no different to walking up to a total stranger and giving them a loan and expecting them to repay it and not vanish with the money before you have found out who they are
  • pelirocco
    pelirocco Posts: 8,274 Forumite
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    A lot of the credit scoring companies will take into account how certain industry sectors preform , hence a new company may get a score without any trading history
    Vuja De - the feeling you'll be here later
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