Credit rating lottery putting SMEs at risk

HUGE variations in in credit ratings are threatening SMEs ability to trade, accountants Shelley Stock Hutter has warned following an investigation into the credit reports of 100 private companies.

The investigation, carried out by the firm in December, found that credit rating agencies Dun & Bradstreet (D&B), Experian and Creditsafe recommend widely different credit ratings and credit limits for the same businesses.

The variables between the highest and lowest average rating of the three agencies for the 100 companies was 150%, the firm said.

Bobby Lane, a partner at SSH who oversaw the investigations, said the firm raised warning signals in November 2011 and that nothing had changed in the three years since.

“Hundreds of thousands (and possibly millions of businesses) are still at risk of what continues to be the credit rating lottery,” Lane said.

“On the one hand an incorrect rating will affect their ability to gain credit from suppliers and raise finance. In addition it could deter companies from growing by avoiding trading or offering terms to potential customers that are creditworthy,” he added.