production management
Has your business ever experienced a poor credit rating, although you have never defaulted on any
payments? What can you do to rectify the situation? By Gordon Skaljak
Improve your
business
credit rating
A credit rating is based upon all of
the data taken into consideration by a
credit reference agency on a particular
trading entity. It’s not unusual for new
or small businesses, to discover that
they have been stuck with a low credit
rating for no apparent reason. But,
there are quite a few ways to improve
the situation. Just as it is important to
build a positive credit profile as a
consumer, companies that trade on
credit, need to do the same.
Firms and partnerships are judged
on different criteria to a private
limited company, because the
principal(s) are personally liable. So, in
most cases, a successful trading track
record and good supplier relationships
will yield the credit required. Certainly
for unincorporated businesses, the
more information that credit agencies
have, the more comprehensive the
credit rating will be. They can only
derive a meaningful credit rating on
information received and validated by
their databases. This may mean
investing some time when approached
by a credit reference agency to
responding to an enquiry, which they
will be undertaking on behalf of one
of their clients who, in turn, is looking
for a way in which to deal with your
company on credit terms. Information
such as the nature of the business and
VAT registration numbers (which give
an indication that turnover is above a
certain threshold) form part of
validation process.
For companies with limited liability,
another set of guidelines apply. Here,
the creditor is making a judgement on
the viability of a separate legal entity
and usually they use as much
information as is publicly available
and, most of the time, they get this
information from a recognised credit
reference agency. Enter the credit
rating. It is important to remember
that credit reference agencies are
providing a service that includes an
opinion or a recommendation. This
opinion is based upon information that
the agency has collated on your
company, through public information
and their own investigations, such as
historical trend analysis, appreciation
of the prevalent economic
environment and, in some cases, direct
contact by telephone.
The most likely starting point of the
32 MWP july 2008
opinion is the documents filed at
Companies House, especially when
trading accounts are filed. For a
Limited company, there are rules about
filing documentation at Companies
House. In the first instance, what
message do you think your creditor
will get, if your company can’t follow
the normal filing rules? Are you
projecting the image of an orderly and
efficient establishment? Keep filing
information up to date, don’t delay in
recording changes of directorship and
keep within the statutory filing
requirement dates, seven months for a
Public Limited Company or ten
months for private limited businesses.
It is generally accepted that newly
established businesses are unlikely to
fail in the very short term, usually
because they have been started with
shareholders capital and/or finance
To view a Ceros magazine you need to have JavaScript enabled in your browser and have the flash player 8 or higher installed. To install the latest flash player, click the icon above, install the flash plugin and then click here to refresh this page.