How Credit Scores Can Affect Securing a Business Energy Contract

What Is A Business Credit Score?

A business credit score is a number ranging from one to one hundred. The higher your business credit score, the better your credit is. The energy contracts offered to your business will depend on your business credit score. If it is bad then you may find it difficult to find a good supplier offering good rates, however if you have a good business credit score then you have nothing to worry about!

How Suppliers Assess Risk

In the business energy market, suppliers are keen to minimise risk. That means before entering into a contract, energy providers typically assess your business's financial health to determine whether you're likely to meet your payments. The outcome of this check often rests on your credit score, and depending on how strong or weak it is, the terms and accessibility of energy contracts can vary drastically.

For many business owners, understanding the impact of credit scores on energy procurement can be confusing. You might wonder why your business energy contract costs more than you thought or why you've been asked to pay a security deposit. Often, it comes down to the results of a credit check, even if your usage or size is similar.

A good credit score signals that a business will likely pay its bills on time, while a low score could suggest financial instability or past defaults. Suppliers may offset this perceived risk by offering contracts with higher unit rates or upfront charges to protect themselves. In some cases, they may even decline to offer a contract altogether.

Unlike personal credit scores, which individuals often monitor closely, business credit profiles aren't something owners check regularly.

What Other Factors Do Energy Suppliers Consider?

Energy suppliers don’t look exclusively at your business credit score to determine risk factor. They also look at a multitude of other factors such as:

• The size of your business
• The industry it operates in (some industries such as pubs are considered high risk)
• Your energy consumption
• Location
• Number of sites
• Current supplier

What Factors Affect Your Business Credit Score?

Similar to personal credit scores, business credit scores are impacted by multiple factors. 

Such as:

• The size of your company (number of employees)
• Payment of bills (If you struggle to keep up with bills you will have a lower credit score)
• Finance Applications (How many times you’ve applied for finance and if they were successful or not)
• Business location (If the area has a high rate of liquidation or debt then this can lower your rating)
• Credit history of company directors (If the companies director is associated with insolvent companies then this can negatively affect your business’s credit score)
  

Challenges for New and Small Businesses

Startups and newly formed businesses are often the most vulnerable in this process. Since credit histories are built over time, these companies might have little or no credit data for energy suppliers to review. This can lead to more expensive contracts or limitations on the deals available. In some cases, new businesses may only qualify for prepayment tariffs or short-term rolling contracts, which are generally more costly and less secure.

It’s not all bad news..

Benefits for Established Companies

Established businesses with a solid financial track record typically find it easier to secure competitive rates. Their strong credit scores reassure suppliers that payments will be made reliably and on time. This often translates into better pricing, longer fixed-term deals, and more flexibility in contract options.

Improving Your Business Credit Score

Businesses with poor or non-existent credit histories can take steps to improve their standing over time. This includes maintaining timely payments on existing bills, reducing debts, and filing company accounts promptly. These actions can slowly improve a credit profile and lead to better energy contract options in the future.

Support from Business Energy Brokers

For businesses that need energy services immediately, working with a business energy broker can provide access to suppliers who are more flexible with credit requirements. Some brokers specialise in helping businesses with less-than-perfect credit find suitable contracts.

Not All Suppliers Take the Same Approach

It's also worth noting that some energy suppliers are more risk-averse than others. Just because one provider declines a contract doesn't mean every supplier will take the same approach. Shopping around or using a reputable broker can offer alternative options that go unnoticed.

As a business becomes more established and financially stable, its credit score will likely improve. This opens up the possibility of renegotiating energy contracts. It's always worth reviewing energy contracts regularly and checking whether your credit profile has improved enough to unlock more competitive deals.

How Can Purely Energy Help?

While it may seem like just another financial detail, your business's credit score has a direct and tangible impact on your ability to secure a suitable energy contract, Purely Energy can help you assess what energy suppliers are best for your business based on your credit.

If you have questions about business credit scores and energy contracts or want help lowering energy costs, contact us at 0161 521 3400 or Info@purelyenergy.co.uk. Alternatively, you can get a quick quote.

Megan Glover of Purely Energy wrote this article. If you have any suggestions or questions, please contact us.