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What factors influence a company's risk score?

The algorithm used to score companies, is adjusted depending on the segment they fall into. Separating companies into segments, ensures that companies are scored comparably against companies of a similar size.

The company segments and associated factors are as follows:

 New Company

Factors that contribute to the algorithm for a new company:

  • Demographics Such as the age and location of the company. Certain Areas have been proven to be have a higher risk of insolvency.
  • Directors Differences in the total number of directors past and present, as well as insolvencies associated with director's other companies.
  • County Court Judgments and Mortgages CCJ’s are a sign of bad debt and can be an indicator of companies struggling financially.

 Small Company

Factors that contribute to the algorithm for a small company:

  • Financial Data Liquidity and leverage ratios. Other key financial figures trends.
  • Payment Performance Describing the late (or not) payment behaviour of a company
  • Industry Analysis Certain trades and industries have a greater risk of insolvency.
  • Directors Differences in the total number of directors past and present, as well as insolvencies associated with director's other companies.
  • County Court Judgments CCJ’s are a sign of bad debt and can be an indicator of companies struggling financially.
  • Ultimate Holding Company Performance We look at the performance of the UHC for example if the UHC is creditworthy or is insolvent.

 Medium Company

Factors that contribute to the algorithm for a medium company:

  • Financial Data Profitability and leverage ratios. Indicators of a company’s current position.
  • Payment Performance Describing the late (or not) payment behaviour of a company
  • Industry Analysis Certain industries have a higher number of insolvencies.
  • Directors Differences in the total number of directors past and present, as well as insolvencies associated with director's other companies.
  • Audit Qualification We look at the auditors comments as if an auditor raises concerns about the company’s ability to continue to trade this in itself raises big concerns therefore is included within the scoring module.
  • County Court Judgments Bad debt can be an indicator of financial trouble.

 Large Company

Factors that contribute to the algorithm for a large company:

  • Financial Data Profitability and leverage ratios. Indicators of a company’s current position.
  • Payment Performance Describing the late (or not) payment behaviour of a company.
  • Audit Qualification and CCJs If an auditor raises concerns about the company’s ability to continue to trade this raises concerns.
  • Company Voluntary Arrangement History When a business has a CVA we do not advise credit terms. Upon completion a CVA will continue to impact the company’s credit score due to it's venerable position.

 Non-Limited Company (Sole Trader)

Without essential information such as financial data our algorithm has to compile other factors to create the risk score.

Factors that contribute to the algorithm for a non-limited company:

  • Demographics Industry code (SIC03), Location of the company, Number of employees, Age of the company, Premises type
  • Payment data Describing the late (or not) payment behaviour of a company, when such data is available