Experian has welcomed changes to data sharing rules which will make more trade credit available to SMEs.
Recommended trade credit limits are expected to increase by a total of £2.4 billion, or £350 per business, for credit report users that agree to new data sharing rules, following a study commissioned by the Bank of England which Experian helped to conduct. These new rules will allow trade credit providers to benefit from the data sent to credit reference agencies (CRAs) by banks and other lenders when they are assessing applications for credit.
Max Firth at Experian, said: “Experian has been a long-term advocate of the benefits increased data sharing can bring to businesses. We were pleased to take part in the Bank of England-commissioned study which has helped to bring the rule changes forward and we’ll now work hard to make the benefits a reality for as many trade credit providers as possible.”
“SMEs stand to gain the most from increased data sharing. Thousands of smaller companies will get a trade credit limit for the first time, increasing options when accessing the finance they need to thrive. Meanwhile, trade creditors will have more information at their disposal so they can make smarter decisions.”
It is also estimated 50,000 mostly smaller businesses will receive a recommended trade credit limit for the first time. Most of the shared data, which will be used within credit scores and credit limit calculations, is positive, so the study found more than half of businesses will see their credit scores increase when this data is made available. About 40 per cent will not experience a change.
The Steering Committee on Reciprocity, a credit industry forum, will make changes to allow trade credit providers which share their invoice payment data to access improved credit scores, recommended limits and summary credit data. It will use the information already shared by the UK’s largest banks and finance providers with CRAs such as Experian.
This news comes after Experian was confirmed as a Designated CRA in the Autumn Statement. Under the Small Business Enterprise & Employment Act, Designated CRAs will see an increase in the breadth and depth of credit data already shared by lenders on a voluntary basis.
The combination of the change in the voluntary data sharing rules and new regulations mandating the sharing of credit data should improve credit availability for SMEs.
Source: Experian Press Release
Editorial note: The Autumn Statement listed Experian, Equifax and Creditsafe as Designated CRAs. This is also a great win for trade credit granters who up to this point faced difficulties in obtaining a composite picture of the financial exposure of a firm (trade credit and bank lines of credit). The Bank of England’s Report on enhancing the use of commercial credit data by trade creditors can be found here.