Following recent research of credit rating agencies and their practices, Shelley Stock Hutter have appealed to the government to enforce greater transparency of agency criteria. The business advisory company were. concerned after discovering that the credit limits offered to businesses and the credit rating, varied wildly between agencies, potentially having devastating consequences for a company.
The fluctuating credit ratings and limits could mean that a successful company may be turned down for business loans or even unable to obtain credit from a supplier. As businesses struggle to obtain finance and decent credit terms, they may be forced into cessation which is bad news for the ailing economy.
The study took place in September 2011, using three of the main credit agencies. The credit limit given for one company varied from £8,400 at one agency to £108,000 at another. The credit limit was raised by one credit agency for a company, to £108,000 from a previous limit of £67,000, while the other two agencies reduced the credit limit available.
Another example revealed a credit limit ranging from zero to £68,000 across the three agencies. Partner at Shelley Stock Hutter, Bobby Lane said:
“Many small businesses put their faith in credit agencies and perhaps unwittingly believe they are not only regulated but also assess companies using the same method. Clearly this isn’t the case, which is of great concern as getting the correct credit rating in this economic environment is crucial as companies have to prove their viability to investors, suppliers and the banks.”
Lane believes the agencies should draw up and abide by a code for transparency, enforced by the government if necessary.
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