Credit ratings can help businesses judge the financial stability of potential partners. Image courtesy of: Sanja Gjenero/rgbstock.com
Small firms across the country have been urged to check then financial status of potential partners before doing business.
The warning came from
192.com, the online business directory, who said that one in three SMEs responding to their recent survey were unaware of a partner’s debt. A further third said a partner had lied to them about their financial position.
More than one in five SMEs said they had been involved in financially damaging business relationships because they didn’t check a partner’s credit rating before moving forward with the relationship.
A further three-quarters (77 percent) had not researched a potential partner’s credit rating by ordering a credit report. These reports, which can be purchased online, provide information on any county court judgements – a failure to pay debts – issued to the company in the previous six years.
Dominic Blackburn of 192.com said: "We advise business to use a company credit report to find out whether a potential business partner can service its debts, pay its suppliers on time, and maintain stability at board level."
The most troubling aspect of a company credit report was found to be outstanding charges, followed by county court judgements and poor
working capital. Close to half of respondents also said changing the business name several times would be a cause for concern.
Other key findings from the survey:
- 32 percent had not been told about the state of a company's finances
- 22 percent had experienced a financially unstable business partnership
- 70 percent of businesses would be troubled by outstanding charges against a company
- 65 percent would be concerned by county court judgments
- More than half would be put off by a company's poor working capital.