Credit rating crisis for UK’s small firms

Two thirds of firms carrying poor credit rating, undermining their ability to obtain credit


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 research.

Credit risk management agency Graydon UK’s June 2009 study found that 60% of the three million small and medium-sized businesses analysed were assessed by the agency as being ‘high risk’ or ‘above normal risk’ of defaulting on trade payments or getting into financial risk.

Just 13% of the firms reviewed were awarded ‘low risk’ ratings.

Martin Williams, Graydon UK’s managing director said: “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.”

Williams cited the lack of a central registry in the UK for unincorporated firms to lodge “even the most basic details about their existence” as one factor inhibiting the sharing of accurate financial information. Successive governments have also chosen to pass legislation reducing the amount of financial information incorporated companies must file at Companies House.

“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,” he added.

© Crimson Business Ltd. 2009

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