Credit reference agency Graydon is launching a service that validates small resellers' monthly management accounts online so that distributors and underwriters can ascertain if they are credit worthy.
Under changes the Government made to the Companies Act, SMEs can with file unaudited or abbreviated accounts, and while this cuts down on administrative red tape the lack of data has also contributed to the insurers reducing or removing limits.
"We can provide something the market has been crying out for; up to the minute financial information they can trust," said Martin Williams, UK managing director at Graydon.
The Enhanced Credit Information Service uses Validis' accounts review software to look at management accounts from all angles including the sales and purchase ledger to the p&l. The business is then assigned a credit rating by Graydon.
Major credit insurers Euler Hermes and Atradius have long called for regular trading updates. Resellers are often cautious about handing over such data but this service will help to "flush out" the companies that are doing well said Williams.
"A lot of businesses that have been targeted by the credit insurers are bucking the trend and can now come forward with information that demonstrates they should not be punished for operating in a sector that is deemed risky," he said.
"This will be good for the SME resellers, good for their customers and good for the credit insurers and distributors," he added.
The charge has not yet been determined but Graydon said it would be minimal.
Eddie Pacey, director of credit services for Bell Microproducts Europe, backed the scheme in principle and reckoned it could benefit existing firms that have come through a rocky trading period and start-up businesses with no track record.
"In the UK the biggest beef that new business face is in obtaining credit because they do not have management accounts that insurers can draw upon. Validis is not nirvana for business information but it is certainly a useful tool," he said.
The system could be open to abuse reckoned Alan Brinicombe, finance manager at Microtronica and he doubted the scheme would enjoy widespread adoption.
"I doubt many resellers will want to send management accounts to Graydon. We talk to customers direct, ask for data, see how that stacks up against the stat numbers and make a decision based on that assessment," he said.