Tips for Building Business Credit from Scratch in Nigeria

For Nigeria’s businesses amid the country’s unfolding business environment, a favorable business credit rating unlocks access to growth prospects and the competitive benefits associated with the ability to secure better loan terms and enjoy a higher level of credibility when engaging suppliers and investors. However, increasing your business credit score in Nigeria commonly involves solving one riddle after another relating to financial ratios, techniques, and procedures. Here is the breakdown of tips on how to build business credit rating in Nigeria as well as consequences of a strong business credit standing.

Credit building is not just about receiving credit finance; it is about credit positioning in the management of the business. Here is how you can improve on your Nigerian business credit score and improve on the credit worthiness of your company.

 

1. Understand What Impacts Your Business Credit Score in Nigeria

If you want to learn how to increase business credit score in Nigeria, then it is essential to know factors affecting it. There are a number of elements used for computing business credit scores such as payment history, credit balance, credit limit, history of credit and recent credit enquiries. Business credit agencies in Nigeria include CRC Credit Bureau, First Central Credit Bureau, and CreditRegistry that get credit information about your business from various banks, suppliers, and other credit reporting organizations to generate credit reports on the financial habits of your business.

A good business credit rating in Nigeria is an indication that your company is reliable and financially healthy making you more attractive to lenders and other players.

Key Takeaway: Understanding the important factors that determine the credit rating sets the basis for improvements being made.

 

2. Regularly Monitor Your Nigerian Business Credit Report

It’s recommended to check it from time to time as you will be aware of the credit situation of your Nigerian Business and if there are any wrong impressions or wrong reports they can be corrected before damaging your business credit any further. Some points on your report including old or wrong information will be a minus to your score, thus, checking on it from time to time is important.

First, get to open your business credit file at Nigerian firms’ credit referencing agencies. Independent credit referencing companies; CRC Credit Bureau and First Central Credit Bureau grants Nigerian companies access to credit reference files for a token. Figuring out your credit report also gives information on which you may require to comply with in order to rectify your score.

Key Takeaway: This way you will be able to respond to any changes that may affect your business credit score without undue delay.

 

3. Pay Your Bills on Time

Maintenance of a clean and healthy payment experience is important for creditworthiness in the business as per the laws of Nigeria. Meeting every bill due on the date due shows the lenders and suppliers that your business entity is capable of paying back the moneys borrowed or owed. No matter if it is electricity, water, gas bills or any suppliers’ invoices or even bank loans, on time payments will in turn help you enhance you Nigerian business credit ratings in the long run.

When it comes to cash flow problems, you can always look for ways that can minimize payments or/and ways that can easily notify you about the due dates. It is also common for many businesses to use lines of credit in order to ensure that they can continue to make payment on time during some of the slow business months; this is also good for credit standing.

Key Takeaway: Paying bills on time is responsible, and the business credit score is a direct result of all the above payments.

 

4. Build Relationships with Vendors and Suppliers

Vendor and supplier relations are beneficial when it comes to business credit building. Most merchants in Nigeria now disclose your payment history to the credit reference bureaus and hence making your prompt payments to them can improve your credit score. Make sure never to leave your vendors in the dark about the transactions they carry out with you and if the latter reports to the credit bureaus then one has to ensure that the payments are made early enough to have a good score.

If your suppliers are not reporting transactions, then there is need to persuade them to do so. On time supplier payment is important when it comes to business credit report and can contribute to increasing your business credit score.

Key Takeaway: Constructing healthy relationships with vendors to secure that each reports transaction can help gain valuable points in your credit score.

 

5. Keep Your Credit Utilization Ratio Low

Another parameter in your business credit score in Nigeria is your credit utilization, or the proportion of the credit that you’ve used to your total credit limit. It is wise to keep close to 30% or less as evidence that you manage your credit responsibly. This is true for credit line facility, business credit card and all other types of business loans.

This way, one can minimize the utilization ratio – which is achieved by paying down credit lines, asking for credit limits to be raised or opened new lines of credit (without going deep into the actives). By keeping this ration in check, you are well armed to create and maintain good credit rating.

Key Takeaway: Staying with low credit utilization is important to clearly indicate lenders that your business employs credit properly.

 

6. Limit Credit Inquiries and New Debt

Whenever your business seeks credit from a credit reporter, a record of credit inquiry is made and this reduces your score by a slight margin. The magnitude of inquiries or rapid growth in the level of debt can characterize the financial unreliability of a client for lenders. To that end, avoid applying for new credit if one is not indispensable, and well as keep in mind the possibly negative effect that such an action might have on one’s credit report.

Every time you open new lines of credit, reflect and determine if they are in line with your business expansion agenda and if they will be of an added advantage to your business. Choose existing credit connections rather than applying to get potential loans to many banks or credit providers as it causes multiple inquires.

Key Takeaway: Refrain from applying for credit as this would alert major creditors and in the process have high debts.

 

7. Improve Cash Flow Management

Unlike conventional credit repair measures that focus more on the timing of payments, the general aspect of cash management is also crucial in credit improvement. Timely management of cash flows enables you to meet these debts and reinvest ondriving sustainable a business credit worth. Nigerian companies can adopt budgetary items, invoices factoring, cash flow tracking tools to monitor movement of cash and payment due dates.

That means having reliable cash flow also opens opportunities to pay off larger debts, which very quickly bumps up your business creditworthiness in Nigeria.

Key Takeaway: Good cash flow means better control of loans and prompt payment and therefore is helpful.

 

8. Consider Business Credit Repair Services

If you still have undesirable remarks about your Nigerian business credit report, and you cannot clear them, consider using the services of a credit repair company. There is always a good accredited credit repair firm that can also go through the report, dispute on behalf of the business, and even provide a business credit repair solution on how to improve business credit score in Nigeria.

Currently, most credit repair companies are affiliated with credit bureaus of Nigeria, and hence, one would not need to go through the process alone. However, one has to be very careful when selecting a firm, some firms are likely to give exaggerated returns or concealed charges that would reduce returns.

Key Takeaway: There are some credit matters that require the help of experts and one of them is the help on matters that are difficult to fix, but be careful and be wise when you are hiring credit repair services.

 

9. Establish a Strong Business Presence and Financial History

Another reason for wanting a longer business history is to show the lenders that the business is more reliable. Some firms are still young, and they are therefore likely to have little financial information that enables them to attain a high credit rating. In this regard, it is suggested to shift the emphasis toward the gradual creation of a favorable references in terms of finance. The effort to open a business bank account, to sign up with appropriate Nigerian authorities, and to regularly remit business taxes could all improve the corporate image.

This will over time establish your business as credit worthy for credit bureaus in Nigeria and therefore enhance your chances of getting better rates for borrowings and business partnerships. 

Key Takeaway: Business experience increases credit worthiness and also makes the lenders more comfortable to fund the business.

 

Conclusion

It is not impossible to improve the credit rating of your business when you consider the following steps in Nigeria. It is as a result of this that the following can help in improving the credit worth of your Nigerian business over time: Understanding the components of your credit score, making consistent credit monitoring practice and effective cash flow management. Moreover, active management with the vendors, low credit utilization and responsible payment history improve credit profile.

The positive change in business credit score will open up better financial opportunities, improved loan terms and better image for your business in Nigeria’s growing market.