Accountancy firm Shelley Stock Hutter called for greater transparency from small businesses and credit rating agencies following research which found “wide variations” in credit ratings and limits.
The firm compared ratings from three agencies – Experian, Dun & Bradstreet and Creditsafe – and found vastly different recommendations for the same company due to a lack of uniform regulations and limited public information from business. The research sampled 100 organisations and showed one company which received a £7,000 limit recommendation from D&B was approved for up to £290,000 by Experian. The credit agencies were also confused whether small businesses’ credit risks were improving or deteriorating; in one instance an agency offered vastly different credit limits to the same company over the two-year research samples. “This issue is really a double-edged sword,” said Bobby Lane from Shelley Stock Hutter. “The credit rating agencies are only able to provide suggested limits based on the information that they have available. Small businesses should investigate the limits being offered by the different agencies and approach them with up to date private management information if they are not consistent with the reality, Shelley Stock Hutter advised. Factors other than county court judgements and arrears that can affect credit ratings, such as amends to year-end date, should also be considered. Do you have any experiences of the credit-rating "lucky dip"? Please add your comments below to provide further evidence of the need for reform in this vital area of business finance.