Bill Chepell | Chicago, Illinois

Developed Countries – Private Company Credit Reports

U.S. / Canada

For U.S. / Canadian private companies, there is no requirement to report any financial information.  Only corporate tax filings are required and this information is not available to credit reporting agencies (D&B, Experian, Equifax).  To provide context, roughly 28 million U.S. businesses file tax returns, but fewer than 15,000 are public companies in which financial statement disclosure is required.

Credit reporting agencies have developed databases comprised of a wide range of fields such as UCC filings, lawsuits, tax levies, and trade payment history.  For credit scoring, these “credit reporting agencies” rely heavily upon the payment history for credit scoring.  Most established companies actively seek to improve their D&B score by providing D&B with payment info.  Financial statements combined with insight into an industry’s outlook is the ideal, but a company’s detailed payment history is valuable.  Overall, assuming adequate information is available, this vets a company’s viability within an industry, but it would not provide insight into its liquidity or degree of leverage.

As an alternative to the traditional firms (D&B, Experian, Equifax), there are providers who base their credit reports on data gathered from various sources.  With 50 states and around 3,000 county administrations, many submissions or issue filings are retrievable for individual companies.  Combined with data of recent purchase activity, a credit report is issued.  Examples include Cortera and Creditsafe.

Another alternative are credit sites dedicated to particular industries.  For instance, client furnished data allows these focused sites to provide comparisons between material or equipment suppliers within particular industries.  North American examples include Tarnell (plastics industry), Lumberman (construction industry), and Seafax (food industry).

European Union

All companies, including private firms, are required to file annual financial statements which are accessible to credit reporting agencies. Although each country has specific rules unique to its required filing, there is a fair degree of standardization. There is a generally accepted accounting plan as the accountant’s role is more auditory rather than advisory. Overall, this universal accessibility across EU countries has resulted in both S&P and Moody’s developing very comprehensive credit reports on private European countries.

Given Brexit is on the immediate horizon, the U.K.’s requirements are noteworthy. There is a Company Registry in which all public (PLC), limited (Ltd) and limited liability partnerships (LLP) must submit P&L accounts, balance sheets, and auditors’ and directors’ reports. Limited companies account for the vast majority of private businesses.

Other developed nations

Other developed countries are varied in their reporting requirements. Japan has very limited requirements for small and mid-sized companies. On the opposite end of the spectrum, South Korea calls for all companies with total asset values exceeding 7 billion Won (roughly 7 million USD) to furnish financial statements audited by an external auditor. Australia lies somewhere in between with reporting standards for various types of firms, but many small businesses do not fit these specifications and are not obligated to report.