Business Credit Rating

13th April 2016

Business Credit Rating: Poor rating hurting your business?
If there is one positive that has come out of the UK’s double-dip recession, then it is reminding businesses of how important their credit rating is. In many sectors, both suppliers and customers have now re-engineered their processes to routinely look at a company’s credit ratings. Within the UK, Experian is one of the major credit rating agencies, assessing credit risk using it’s ‘Delphi Scorecard’ index:
 Score            Risk Rating
91-100            Very Low Risk
81-90              Low Risk
51-80              Below Average Risk
26-50              Above Average Risk
16-25              High Risk
1-15                 Maximum Risk
0                      Serious Adverse Information/Dissolved 
This Delphi score is calculated using an algorithm based on:

  • Average current trade creditor days,
  • County court judgements (business & directors),
  • Worst consumer score of director,
  • Insolvency events reported in London Gazette,
  • Lateness of filing of financial statements,
  • Poor financial results (inc net worth & current ratio),
  • Recent increase in credit applications tracked through previous searches.

In most cases, SME’s submit abbreviated accounts to Companies House, so there is very little data available to Experian to calculate their Delphi score. So what can be done to improve your Delphi score (beyond trading out of your current weak position):

  • Submit accounts to Companies House before deadlines.
  • Manage the timing of filing accounts on the public record at Companies House, so as to delay/minimise the period of bad news and advance/maximise the period of good news.
  • Consider changing your accounting reference date, if it presents a stronger balance sheet or delays the filing of bad news or advances the filing of good news.
  • Reschedule and disclose directors loan accounts as a long term liability rather than a short term liability,
  • Consider options for balance sheet presentation (eg position of Accruals),
  • Convert directors loan account into equity (inc redeemable preference shares), or release it,
  • Recognise a deferred tax asset for losses carried forward,
  • Issue further equity (consider called up but not paid shares).


 
Other items in Blogs
 
Lisa Searle
8th January 2018 National Minimum Wage Rates

  Effective from April 2018 the National Minimum Wage rates will be increasing again, as per the below figures: Workers aged 25 years or more: £7.83 per hour Workers aged 21 to 24 years: £7.38 per hour Workers aged 18 to 20 years: £5.90 per hour Workers aged under 18 (but above compulsory school age):…

Read More »

Julie Quayle
8th January 2018 HMRC – Appeals

  HMRC has updated the postal address for where to send grounds for appeal if you have not paid your PAYE and National Insurance contributions on time. The address that should now be used is: DM PAYE Late Payment Penalties HM Revenue  and Customs BX9 1EW HMRC will charge penalties if more than one of…

Read More »

Jaimie Lane
4th January 2018 Charity annual returns due

  Charities with the financial year end of 31 March 2017 must submit their annual return by 31 January 2018, 10 months after the year end. What you need to submit varies based on whether it is an un-incorporated organisation or a charitable company. It also varies based on income of the charity – requiring…

Read More »

Richard Alecock
4th January 2018 Directors’ responsibilities

  Limited company directors and secretaries are collectively referred to as ‘officers’. Directors are appointed by members (shareholders and guarantors) to run and manage the day-to-day operations of the business. Secretaries are optional for private companies, but not public companies. They are usually appointed to assist directors with important administrative tasks. An Overview Company directors…

Read More »

Andrew Band
4th January 2018 EU competition infringements by European truck manufacturers

  The European Commission imposed fines of €3.4 billion in July 2016 and September 2017 following findings that a number of manufacturers were party to a cartel at senior management level from 1997-2001. Breakdowns of the fines for the companies involved were as follows: Daimler/Mercedes – €1 billion Scania – €880 million DAF – €752…

Read More »

Ian Piper
2nd January 2018 Compulsory Purchase Orders: Opportunity to tax efficiently diversify?

  With numerous businesses currently being forced to sell property under compulsory purchase orders (COP’s), a little known tax rule may be of assistance in enabling you to diversify your investment in your trade into a buy-let-investment without incurring any tax: HMRC guidance HS292 Business asset rollover relief is a long established rule which allows…

Read More »