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
 
Lucy Bayliss
12th November 2019 Finance charges for landlords – The knock on effects

  Since 6 April 2017, changes are being gradually introduced to restrict the relief available to landlords in respect of their finance costs. Under the old rules, the interest element of the mortgage payments was 100% allowable for income tax purposes. However, this is gradually being replaced with a 20% tax reducer instead. The timetable…

Read More »

Barbara Nicholas
1st November 2019 Brexit halts Budget

With all the uncertainty over Brexit, we waited a long time to learn the date of Sajid Javid’s first Budget.   Finally we learnt this was to take place on 6th November, amid great excitement at muted suggestions about the possible abolition of Inheritance Tax and radical changes to stamp duty.   The bubble has…

Read More »

Vanessa Pearson
28th October 2019 Off-Payroll Worker Tax Rules: Be prepared!

Knowledge based contractors working in the private sector will hopefully now be well aware that, subject to any possible Government last minute change of heart, new tax rules are coming next April. For many, who are not currently following IR35 rules, this will mean a large increase in the tax they pay; perhaps tens of…

Read More »

Matilda Mawson
24th October 2019 I’ve got 99 Problems but my Tax Return isn’t 1!

There are now only 99 days before the tax return filing deadline of 31 January 2020. Do not delay – file it today! Not sure if you need to file a tax return? HMRC have a questionnaire that only takes a few minutes and will check whether any of your income or gains will require…

Read More »

Jeannette Hume
24th October 2019 R&D Tax Claims: HMRC finally go-digital.

In February 2019 HMRC introduced an online tool to submit Research & Development tax relief claims (both SME and RDEC claims). It is still necessary to make the claim on a company tax return (form CT600), but the accompanying detailed R&D project information can (but does not have to) now be submitted by completion of…

Read More »

Ruth Pearson
17th October 2019 Is it too early to talk about Christmas!

In December 2018 HMRC wrote to employers to advise of a temporary easement on reporting PAYE information in real time. This was for a number of reasons, one of which could be due to businesses closing over the Christmas period and therefore having to pay staff earlier than normal.   HMRC have received feedback from…

Read More »