Businesses in East London have the worst credit scores in the country due to the area’s rampant start-up culture.The E postcode area in East London – home of the Silicon Roundabout tech start-up hotspot – has been revealed as the worst postcode area in the country when it comes to average credit scores.
According to figures from Experian, businesses with an E postcode have an average Delphi credit score of 39.5. The lower the credit score of a business the bigger the risk they are expected to pose to investors or lenders.
A score of 39.5 means a business is an above average risk, but it is still someway off the score of 25 that would be needed to rate as a high risk investment.
Areas with a high volume of start-ups tend, consequently, to have more businesses that haven’t had time to establish a record strong enough to merit a high credit score. The sort of tech start-ups native to the Silicon Roundabout also tend to have a high rate of failure.
Businesses in the SE postcode area in South East London were the next most risky prospects across Britain with an average score of 42.
London areas tended to be the most risky investments with eight of the top ten most risky postcodes located in the capital.
At the other end of the scale companies in Lerwick, Scotland had the best credit ratings in the country with an average score of 64.9.
Rural areas are far more likely to have businesses with good credit ratings because the pace of the business environment tends to be slower.
Unlike in urban, city areas businesses in rural areas tend to be more long-term ventures and have built up their credit scores over time.
Ade Potts, Managing Director of Experian’s SME business, said: “All businesses have a credit score. Taking the time to check it can help directors understand how their business is perceived by lenders, suppliers and even customers; whether they are seeking growth funding or trade credit for vital materials.
“Our data shows that many of the areas with lower credit scores are in London and the South East, where there is a high proportion of start-ups which are just beginning to establish a credit profile.
“It’s important for the owners and directors of early-stage companies like these to understand their credit score, what affects it and to take proactive steps to improve it – such as paying suppliers and filing accounts on time, so they are in the best position to capitalise on future growth opportunities.”
This article appears on Telegraph.co.uk
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