D&B Rating Categories |
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D&B Finland is the first and only company in Finland to have defined the RATING or creditworthiness category of nearly every company which is entered in the Trade Register, carries on normal business and has been found active.
There are seven rating categories:
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The RATING category is based on the automated RATING system developed by D&B. This continuously updated rating system evaluates companies' creditworthiness and ability to deal with credits associated with normal business by systematically gathering and analysing information about their operations, finances, background and paying habits.
Since the RATING is updated automatically it is more current than any other credit rating. Produced by machine, it is always objective and facilitates comparison between different businesses.
Ratingmodel :
RATING consists of four principal rating bases: OPERATIONS, BACKGROUND, FINANCES and PAYING HABITS. The final creditworthiness estimate (RATING), i.e. an estimate of a company's ability to deal with obligations associated with normal business, is reached by analysing these rating bases separately and by weighting them correctly against each other.
Operations
Many creditors neglect the first precaution – checking whether a business applying for credit really exists. A rated business must be duly entered in the trade register or other public register. Thus REGISTER DATA indicate that the business legally exists.
A business's AGE is an essential piece of information in respect of rating, because the start of business operations always involves a risk and a business is at its most vulnerable during its first years of existence. D&B Finland considers business operations established if they have been operating for more than 2 accounting periods.
About 230.000 of the businesses entered in the trade register are active according to D&B.
The ACTIVITY of positively rated businesses has been ascertained by either the authorities or D&B, so you know that you are not dealing with a "shell company".
Background
GROUP information is of great importance to the background. The old belief should be forgotten that belonging to a group of good financial standing guarantees the creditworthiness of even a weak subsidiary. On the other hand, credit relations with a company of seemingly good financial standing is a risk if it is part of a weak group.
CORPORATE RELATIONSHIPS refer to the parent and associate companies of the company under review or to companies otherwise closely related with it. Their rating has an effect when looking at the background, as does the credit history of the RESPONSIBLE PERSONS owning or controlling more than 50% of the company.
Finances
D&B Finland Oy's stand on a business's finances is in most cases based on an analysis of FINANCIAL STATEMENTS. The analysis concentrates on three main problem areas: PROFITABILITY, LIQUIDITY and SOLVENCY. Any CONSOLIDATED FINANCIAL STATEMENTS have an impact when evaluating a company's finances, particularly if they are in conflict with the company's own financial statements.
OTHER FINANCIAL INFORMATION refers, for example, to interim accounts or other factual information about the company's finances from official or unofficial sources.
Paying habits
Any public or unpublished DISRUPTION IN PAYMENTS naturally has a negative effect on the estimate of a business's payment behaviour. It should, however, be borne in mind that absence of disruption in payments does not guarantee creditworthiness. Disruption in payments is an indication of financial difficulties which have actually originated months ago.
INFORMATION ON PAYING HABITS obtained from creditors gives the best picture of a business's current payment behaviour. This is the information that D&B Finland Oy continuously gathers automatically using the PAYDEX system from creditors which act as its partners.
Rated businesses
D&B Finland Oy focuses only on the rating of companies which are engaged in normal business. Normal business refers to companies which have a turnover by definition. Thus banks, insurance companies, associations, housing corporations, etc. are not rated.
For a business to be rated, it must be duly entered in the trade register. For example, an unregistered limited company will not be rated.
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