How can I sort out my ‘high risk’ credit rating?

I’ve discovered that my catering business has been labelled ‘high risk’ and now I’m at risk of losing hundreds of thousands of pounds. I only found out when we were turned down for a big contract with a public sector client. Our turnover is around £15m and we’ve been red flagged by more than one credit agency because of late payments to suppliers amounting to less than £2,000. What can I do to rectify the situation?

A. Martin Williams writes:

It’s interesting to note that you believe your company’s “high risk” label is a result of slow payments to suppliers amounting to less than £2,000. Credit reference agencies such as Graydon, the company I run, do obtain trade payment data from donor company sales ledgers, but it’s rare that slow payments on their own would produce the worst kind of rating.

Non-payment of trade invoices sometimes ends up in court, and this action on the part of disgruntled suppliers of goods or services could lead to the registration of County Court Judgments (CCJs). For some credit granters, the presence of CCJs is a real no-no, and this attitude can be taken by some commercial credit agencies too.

I’d check first with the registry that stores all CCJs, The Registry Trust, whether there are any recorded against your company. Visit their website, which will explain how you can search for details. It’s a useful resource that can help you understand why lenders might refuse you credit and make sure your record is up to date.

If you discover that CCJs do exist on your company’s file, the site also explains the remedial action you can take to get them off the record or at least show that the judgments have been paid off. If the debts are paid, albeit well after they should have been, the CCJs would then be recorded as “satisfied”. Satisfied CCJs are looked upon much more favourably by credit agencies and credit managers alike.

However, if you discover you have no CCJs against your company name, and that slow payment trade references are behind your “high risk” rating, start sticking to your suppliers’ payment terms and eventually the good payment information will filter through to the credit agencies, and your poor payment record will become a thing of the past. If cashflow seems to be a problem for you, and despite your best intentions, sometimes you can’t pay up on time when money is due, speak to your bank manager, who may suggest an alternative finance solution such as factoring or invoice discounting to ensure that your trade debts are paid on time.

This will significantly improve your credit rating relatively quickly and you’ll find prospective clients in both the public and private sectors much more likely to deal with you.

Martin Williams is managing director of credit referencing agency Graydon, is a fellow of the Institute of Credit Management and has over 30 years of experience in the credit industry.


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