Management
Graydon warns of credit rating crisis |
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| Management | |
| Written by Paul Williams | |
| Friday, 26 June 2009 | |
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Failure to share financial information exacerbates creditworthiness crisis for UK small firms.
Nearly two thirds of UK small firms are carrying a credit rating which may negatively affect their ability to obtain credit finance and favourable credit terms from suppliers, according to new research from Graydon UK, a leading credit risk management agency. The Graydon warning comes after Equifax used the example of football clubs to highlight just how it is organisations can slip in the credit rating stakes. For example in the Scottish League Hamilton Academical, Hearts and Motherwell all considered insolvent. At Equifax an organisation is considered insolvent if they would struggle to meet obligations if all their creditors came at once to ask for the money they are owed. Martin Williams at Graydon says: “While the recession has unquestionably had an adverse impact on the creditworthiness of small firms in the UK, just as much damage has been inflicted by the sheer absence of relevant information on their financial performance. This lack of data is known to damage companies’ credit scores, just as it does with personal credit scoring. “This long standing problem results in part from the lack of a central registry in the UK for unincorporated firms to lodge even the most basic details about their existence. Successive governments have also chosen to pass legislation reducing the amount of financial information incorporated companies must file at Companies House. “Politicians will claim that they’re supporting business by reducing the red tape burden associated with filing company accounts. However, all the current system serves to achieve is to strangle the flow of credit so desperately needed by UK businesses in order to rejuvenate the economy.” “Companies need to appreciate that sharing current financial information holds the key to seizing more control over the credit recommendation they receive and the credit they can access to help them run their business."
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