One in Ten Companies Won’t Risk Trading with Start-ups

Almost one in ten companies avoid trading with firms that are less than a year old, due to concerns about their financial viability, research from Creditsafe has found.

A survey of 800 companies by the online credit checking agency revealed that nine% of companies will not do business with firms that have been trading for less than 12 months, because they prefer to work with customers, suppliers and partners that have an established credit history.

“There is a danger we could choke the fledging economic recovery if businesses refuse to trade with start-ups purely on the basis that they are a new company,”

said Creditsafe business development director, David Knowles.

“Businesses need to take sensible steps to accurately establish the financial health and creditworthiness of trading partners rather than relying on gut instinct and preconceptions. Carrying out a credit check will establish how viable the firm is.”

The research also highlighted that 12% will not trade with businesses that do not have a website and 52% won’t work with firms that only have a mobile phone as a contact number.

Knowles said that businesses that solely have a mobile number could seem “impermanent”.

“If a start-up just has a mobile phone, the business they are dealing with will be concerned that they could easily shut down and become untraceable. “If you are a new business you should be as transparent as possible, give a full address and make it clear you aren’t trying to hide anything.”

More than a fifth of respondents also said they would not trade with a business that has not yet filed its accounts.

“Only limited companies that have been incorporated for more than 22 months have to file accounts, but if a business does have to it is important for their credibility that they do so on time,” said Knowles.

Forum of Private Business spokesman, Phil McCabe, agreed that businesses may be wary of trading with start-ups due to a lack of information.

“They may be cautious if they are unable to make an informed decision about the business they are considering trading with,” he said. “We’re entering a new era of financial information in the wake of the credit crunch ― it’s incumbent on start-ups to work harder to show they are viable.

“Firms need to get knowledge of their own financial situation by using a credit-checking service to check their rating, and by asking their accountant to help them to update their accounts,” added McCabe. “They should then take proof of their viability along to any meeting with a potential supplier or business partner.”

One in Ten Companies Won’t Risk Trading with Start-ups

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