Small business bank account holders lack credit awareness

According to research recently conducted by Experian, many small business bank account holders are severely lacking when it comes to credit awareness.

The information services firm interviewed a total of 700 small businesses in the UK, discovering that 71 per cent neglect to check the credit status of their customers.  This can result in problems raising working capital through greater risk exposures to being paid late or not receiving any payments at all, Experian said.

The survey also found that 39 per cent of respondents had no idea what was a credit score.  More troubling is that 61 per cent of small businesses have never even reviewed their own scores, which could lead to difficulties in securing a business loan if their credit score is incorrect.

The information services company said that businesses that fail to check their credit scores have a lower likelihood of becoming aware of any possible issues until they find themselves losing out on a potentially lucrative contract with a prospective customer or are refused service from a new supplier as well.  According to Experian, for many small businesses low scores can be the result of neglecting to file accurate or complete information or even a lack of detailed data and not from any underlying financial insecurities.

Low credit scores can affect the ability of a business to attract new customers or access finance, and can also force suppliers to opt for trading agreements that are more stringent that needed.  A change in terms or loss of a single customer can have an incredible impact on the financial health of a small business, since they tend to primarily rely upon a relatively small pool of customers and suppliers.

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