How can you tell if a risk score is so poor that credit should not be provided?

The scores are banded by the analysis and the report will clearly indicate to clients which band the score falls into. Details of these bands can be found below.

• Score 0

Scores of 0 represent companies which no longer exist (e.g. they are dissolved), have either failed in the past or are no longer in a position to request credit unless through some form of external authority (e.g. Receiver).

• Score 1

Scores of 1 represents those companies who have a recent Intention to Dissolve notice or Winding-up Petition.

• Score 2-15

These companies are deemed to be very high risk by the scorecard. Any company within this band will have a number of characteristics resembling those displayed by failed companies. Parental or Director guarantees are often recommended.

• Score 16-25

These companies are deemed to be high risk by the scorecard; (e.g., companies with very large losses and a weak Balance Sheet or high levels of County Court Judgments. Many clients may choose not to provide credit to companies in this band.

• Score 26-50

These companies are deemed to be above average risk by the scorecard. They may include established businesses that have made substantial losses; or the Balance Sheet may show a deficit in capital employed.

• Score 51-80

These companies are deemed to be below average risk by the scorecard. They may include companies that have incurred large losses or companies with high levels of debt.

• Score 81-90

These companies are deemed to be low risk by the scorecard and do not exhibit many of the characteristics of failed companies.

• Score 91-100

These companies are deemed to be very low risk by the scorecard and exhibit few or none of the characteristics displayed by failed companies.

The choice as to what level is appropriate for each client will depend largely on the level of risk they are prepared to take on board. Some clients may have a greater aversion to risk and only give credit to companies with, say, scores over 50. Others will seek out higher risk companies and charge them higher prices for their goods/services to cover the greater risk. Many credit controllers feel uneasy extending unqualified trade credit facilities to businesses with scores under 16.