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.