Small firms given greater control over credit ratings

New service will give small businesses more power to positively influence their credit score


A new service enabling small and medium-sized businesses to take greater control over their credit scores has just been launched.

The free service, launched by data analytics specialists Future Route in partnership with credit referencing agency Graydon UK, was developed to enable small firms to submit up-to-date evidence of their creditworthiness to credit reference agencies. 

Martin Williams, managing director of Graydon UK, said credit referencing agencies were often faced with a dearth of information on small businesses, especially start-ups, which in the credit-checking world can be just as damaging as bad information.

According to Graydon, some 60% of small and medium-sized businesses in the UK are classed as an ‘above normal’ credit risk. However, the information credit agencies go on, much of which comes from historical account information submitted to Companies House, can be up to 22 months old.

CreditPal allows small and medium-sized businesses to submit their monthly management account information, which is then validated by the software and approved by the business before being incorporated into Graydon’s credit scoring database.

Stephen Alambritis, head of public affairs at the Federation of Small Businesses, commented: “Lenders repeatedly deprive small businesses of credit lines declined solely on the basis of historical financial information. The recession has exacerbated this issue by increasing lenders’ appetites for detailed evidence that firms are not going to default on their debts.

“CreditPal irreversibly shifts in this imbalance. Credit professionals will have the peace of mind which comes from knowing their decisions are fully-informed. At the same time, small businesses now have an unprecedented opportunity to demonstrate their merit of the access to finance they need keep them on track for growth.”

Research conducted by Graydon found that 70% of the small and medium-sized firms that requested a review of their creditworthiness based on their management accounts in 2009 had their credit score adapted positively as a result.

Williams said: “An overwhelming majority of small firms saw their credit ratings adversely impacted by the recession but as our data demonstrates, it is possible for their credit status to be repaired as their trade begins to show signs of recovery.

“It’s absolutely crucial that owners and managers move away from the mentality that regards all detailed financial information about their businesses as private and confidential. The provision of real-time information to a credit reference agency could make a crucial difference when it comes to refinancing existing debts or seeking to raise capital to fuel further business growth and development.”

© Crimson Business Ltd. 2009

   

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