Business Credit Checks

[Lcharm]

Can any explain what factors credit agencies* take into consideration when conducting a credit check on a business?

I'd imagine the usual stuff such as how much credit is already taken out, late payments, defaults, arrears etc... but is there anything else?

Turnover, balance sheets? What if it's before the company's first year of trading?

*I'm talking specifically about agencies used be private companies to see if it's worth giving credit to another business rather than a bank itself

 

[Paul_Rosser]

All of the above, some firms also look at how long it's taking for a firm to pay it's invoices (30,60,90 days) the quicker the better.

 

[ITsoldUK]

I would imagine that before you have a trading history they would take all of the above and the business principles credit history into consideration AND look to capture any security that may be available.

IMHO

 

[yourcreditmanager]

Can any explain what factors credit agencies* take into consideration when conducting a credit check on a business?

I'd imagine the usual stuff such as how much credit is already taken out, late payments, defaults, arrears etc... but is there anything else?

Turnover, balance sheets? What if it's before the company's first year of trading?

*I'm talking specifically about agencies used be private companies to see if it's worth giving credit to another business rather than a bank itself

Though you've covered the main points, there's some other factors too, particularily if the business is an incorporated entity, you can can get info on who the officers (directors) of the company are, number of current directorships and what companies they are, share holdings etc.

Other supplier payment data can be recorded too which can be interesting but it depends on the report provider.

It's often - though not certainly not always the case - that a limited company often has a modest credit rating until its first set of accounts are filed at Companies House which is often the most used set of data that the reference agencies "crunch" in setting credit limits and assessing credit worthiness in general. In a similar vein, non incorporated businesses such are partnerships and sole traders can often have lowish suggested credit limits simply because the credit reference agencies have less access to financial data in order to assess and set a suitable limit.

I hope this helps.

Michael

 

[internetspaceships]

Hi Charm

All the things you mentioned and a few more.

Financial worth is a very big thing for credit worthiness, so your balance sheet counts for a lot.

Also key ratios year on year, showing increases in the positive figures, i.e. net profit, net worth make a lot of difference along with average payment dates on your invoices.

Hope that helps.

Jon