Member Article

Helping protect business credit scores during the Coronavirus pandemic

With the COVID-19 outbreak causing major disruption worldwide, a number of UK businesses find themselves in a place of real uncertainty and a legitimate worry that they will be faced with the prospect of major cashflow problems.

As these businesses task themselves with understanding, reacting to and learning lessons from this ever-changing situation there are some very straightforward routes to ensure they are taking appropriate action to try and limit the damage caused by the pandemic.

For example, in an effort to keep the UK economy moving, the government has implemented a package of support to help businesses that need it the most. The latest step sees the introduction of the Coronavirus Large Business Interruption Loans Scheme (CLBILS), which has been expanded to cover all viable organisations, including those with annual turnovers over £500m.

Credit reference agencies (CRAs) also have an important role to play and this week confirmed new guidance to protect business credit scores during the COVID-19 pandemic.

Lenders who have agreed an ‘emergency payment freeze’ with a business that may be worried about meeting regular payments should not report a build-up of arrears to Experian, and the three other designated CRAs, ensuring business credit scores are protected from this forbearance during the agreed timeframe.

In line with the latest FCA guidance, organisations are expected to act in the best interests of their customers and show greater flexibility at this difficult time. Lenders will decide whether to offer affected businesses the emergency payment freeze based on their circumstances. The emergency payment freeze for businesses will help them to navigate the period when they are most stretched.

The new guidance covers both the voluntary Credit Account Information Sharing (CAIS) and the Government’s mandatory Commercial Credit Data Sharing (CCDS) scheme, which includes Current Account Turnover (CATO) data as well as credit accounts.

If a business falls behind on their payments without agreeing a payment freeze, including cancelling their direct debits, then the usual reporting position from lenders will apply.

Further to this, Experian has also agreed to help minimise the impact on the commercial CRA credit assessment of any application by a business for a government scheme designed to support their survival through COVID-19. Ordinarily, in some cases, using these schemes could be interpreted as a sign of business weakness.

We’re keen to play our part in supporting businesses during this challenging time. While a credit score may seem like a small consideration in the midst of an economic emergency, it may be critical to business owners who need to borrow money, ask vendors for credit or take other actions to shore up their businesses down the line.

This was posted in Bdaily's Members' News section by Jonathan Westley .