Throughout the economic downturn, banks, credit insurers and trade suppliers have all complained about having to make risk decisions based upon "out of date" statutory financial information from Companies House. The demand has grown for organisations to open up their monthly management accounts if they want to gain access to credit and finance.
SME business owners, unsurprisingly, have not greeted this type of request for greater financial transparency with a lot of unbridled enthusiasm. SMEs are traditionally very wary about imparting information of this nature to anyone outside their organisations. One of the problems is that many SMEs don't understand how credit granters come to their decisions even when they do open up their books to gain more credit. I know of many instances where companies have submitted monthly accounts to prospective trade suppliers that they think are pretty good- only to be refused credit "because the figures didn't pass our credit score test". In short, SMEs don't understand, and therefore don't trust, credit scores produced by credit agencies or trade suppliers.
Recent research conducted by Graydon and the Forum of Private Business revealed that SMEs are taking the view that if credit agencies became a little bit more transparent about how they produced their credit scores, maybe they would reciprocate by opening up their management accounts. This seemed like a fair swap to me. So, I got in touch with the other major credit agencies in the country in order to produce an illustrative guide to how we credit rate businesses. Click here to see it. It's a first!!!