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Check Credit Rating of a Business Prospect in Australia

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Check credit rating of a business prospect before you approve or reject its loan application. (Photo credit: Philip Taylor PT)

Before a credit provider in Australia approves a loan or decides to extend a credit line to a business client, the creditor must first take a deeper look at how reliable that prospect is when it comes to paying their debts and whether their financial standing seems strong enough to allow them to pay for substantial debts. To check credit rating information, credit providers go to licensed reporting agencies, such as Veda or Dun and Bradstreet. These agencies only perform a credit check on the prospect’s financial history within the last five years after a request is sent for it by a credit provider, such as a lending company or a commercial establishment that allows their customers to pay for goods and services at a later date.

Check Credit Rating of a Company and Its Directors

If a credit provider wants a comprehensive report on a target company’s overall financial history, this information must always include a credit rating check on each member of its Board of Directors. The inclusion of each director’s financial background helps the provider decide whether these business leaders can be trusted to carry the financial burden of their company’s debts. In a business credit application, the company’s directors normally act as guarantors and present information to the creditor about their own assets and liabilities.

A credit check is most often applied to small to medium enterprises rather than to large corporations because the latter usually have more credit activities going on. The transactions related to these activities occur simultaneously, which leads to difficulties in tracking prompt payments vis-à-vis overdue accounts. And so, a credit provider can only request from a third-party agency to check credit rating of a business prospect that has less than ten million dollars in gross revenues from operations during that year. In addition, the prospect business must have less than fifty people employed and its total assets must be less than five million by the end of that same year.

What a Report from a Business Credit Rating Check Contains

When reporting agencies are asked to produce a report after they check the credit rating of a small business, they usually ask the credit providers to specify what kind of report they’re expecting. A comprehensive report on the company and its directors takes around three days to deliver. However, when the provider needs the information quickly, the agency would recommend either a Company Credit Report, which is highly focused on the company’s overall financial situation, or an ASIC Company report that relies on whatever information has been recorded in the database of the Australian Securities and Investments Commission and in other public records.

A business’ credit check report includes its present relationships with other credit providers, past applications for a credit account or a business loan, past instances of missing payments and currently unpaid debts, and other sensitive information, such as court judgments, writs, and summons. All these information are evaluated by the credit provider and given a score based on their criteria. A negative score could prove very risky for the credit provider if it decides to approve the loan or credit extension. To find out more about privacy rights when a request to check credit rating has been made and what types of information is a credit provider allowed to disclose for verification purposes, consult the experts in credit risk assessment from your area.

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