Huge differences in credit ratings for SMEs
A move towards transparency is needed in order to make sure the same rules are applied across the board when small businesses apply for credit ratings, according to Shelley Stock Hutter.
The accountancy firm investigated the practices of credit rating agencies and discovered huge disparities throughout the sector.
It is now calling for ministers to open up the process as the same businesses were given widely differing ratings across agencies during the study.
Credit ratings are incredibly important for small businesses to obtain the lending they need in order to grow and boost the economy, but it seems there is no correlation between their performance and their rating.
Agencies analyse the probabilities whether a company will default on any debt or not using non-public information in order to assess the risks of lending to them.
Bobby Lane, a partner at Shelley Stock Hutter, said: “Many small businesses put their faith in credit agencies and perhaps unwittingly believe they are not only regulated but also assess companies using the same method. Clearly this isn’t the case.”