Small firms face ‘lottery’ when applying for credit ratings, according to new report
Recommendations can range from £7,000 to £290,000
Small firms seeking credit ratings are being forced to endure a ‘lottery’ because of the vast discrepancies in valuation provided by different firms.
That is according to a new report from accountants Shelley Stock Hutter, based on 100 credit ratings issued to private companies. The report claims that a typical small business is likely to receive a markedly different credit score from each of the three main agencies – Dun & Bradstreet, Experian and Creditsafe. In fact, the researchers found that the average discrepancy currently stands at 150%. One company sampled in the research received ratings ranging from £25,000 to £85,000; for another respondent, the ratings jumped from £7,000 to £290,000. Shelley Stock Hutter is now calling for greater transparency in the way ratings are formulated – while the Forum of Private Business (FPB) was quick to condemn the current system. FPB spokesperson Phil McCabe said: “This has been the untold story of the ongoing problems surrounding small business lending. It is also a serious supply chain risk. “Companies will simply refuse to trade with firms based on flawed credit reports, and some small businesses could be persuaded to trade with high-risk organisations based on an overly generous score.”