Graydon UK says the recession has forever changed the way business risk is assessed and priced, meaning that SME resellers need to be more transparent with financial information when called upon by credit insurers.
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The credit reference agency has today unveiled CreditPal, a free service that uses Future Route business data analytics software to validate an SME’s monthly management accounts which are then fed into Graydon’s credit scoring data base.
Around sixty per cent of small businesses in the UK have ‘above normal credit risk’ said Graydon UK yet 70% of firms that have called for a review of their credit worthiness have seen their rating improved.
Martin Williams, Graydon UK managing director, said “an overwhelming majority” of SMEs had seen their credit rating dip in the recession.
“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,” he said.
His comments head address concerns raised by some in the distribution channel when MicroScope first revealed Graydon was planning on launching CreditPal.
Statutory account information held at Companies House can be up to 22 months out of date which does not accurately indicate a businesses recent trading history.
“The finance and credit industry, as well as supply chain managers, now require timely and validated monthly management accounts information,” said Christopher Poll, chairman at software developer Future Route.
Philip King, director general at the Institute of Credit Management, said validating monthly management account information was seen as the panacea to pricing and managing risk.
“The availability of comprehensive information is vital to restoring confidence in assessing financial risk of incorporated and unincorporated businesses,” he said.